Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

SOUTH AFRICAN BREWERIES BILL [Lords] (By Order)

Consideration, as amended, deferred till Thursday next.

BRISTOL CORPORATION BILL [Lords] (By Order)

Second Reading deferred till Monday next at Seven o'clock.

PETITION

Secondary Education, Sutherland

Mr. Maclennan: I beg to ask leave to present a Petition from the residents of the parishes of Dornoch and Creich in the County of Sutherland, numbering 1,638, praying that the Secretary of State for Scotland reconsider his approval of the scheme of reorganisation of secondary education in the County of Sutherland and, in particular, that he do retain Dornoch as a six-year school as at present and cause a local inquiry to be held under Section 68 of the Education (Scotland) Act, 1962, for the purpose of establishing the accuracy of the various matters described in the Petition which should determine the matter.
And your Petitioners, as in duty bound, will ever Pray.

To lie upon the Table.

Oral Answers to Questions — HOME DEPARTMENT

Approved Schools (Corporal Punishment)

Sir J. Vaughan-Morgan: asked the Secretary of State for the Home Department what plans he now has for the abolition of corporal punishment in approved schools.

The Secretary of State for the Home Department (Mr. James Callaghan): I am considering, in consultation with the professional and other organisations principally concerned, the development of alternative methods of controlling difficult behaviour so that the use of corporal punishment can be phased out.

Sir J. Vaughan-Morgan: The Home Secretary's predecessor last August said that he was going to invite the associations particularly concerned to join the children's department in this consideration. Why has no firm action been taken if that were his intention?

Mr. Callaghan: The way is now clear for consultations to begin. They were held up for certain reasons with which the right hon. Gentleman is acquainted, but the Heads' Association have now been invited to discuss their views and their problems, including the need to provide adequate protection for staff and to clarify some of the provisions of the rules.

Polygamus Marriages (Dependants)

Sir Knox Cunningham: asked the Secretary of State for the Home Department if he will arrange for records to be kept of the wives and children of polygamous marriages who enter the United Kingdom as dependants of immigrants, in order that some estimate may be made of the likely charge to public funds caused by such dependants.

The Under-Secretary of State for the Home Department (Mr. David Ennals): No, Sir. The hon. and learned Member will be aware from previous Answers that the number of wives and children of polygamous marriages admitted to this country is small.

Sir Knox Cunningham: Is it not strange that the Government are prepared to spend public money in support of polygamy when our United Kingdom citizens in like circumstances would be sent to jail for bigamy? How can the Minister say—as he said to me—that there are very few of these cases when he has no records and will take no steps to get records?

Mr. Ennals: It would be a very time-consuming operation for the immigration officers and would lead to delay if we kept particulars of everyone who arrived, but I assure the hon. and learned Member that the number is very small, that there is no known incident of a man arriving with two wives and very few cases in which a second wife has joined a husband. As for the benefits of the Welfare State, there are no benefits for second wives—even though there are very few such cases—and there are benefits only in respect of the children.

Mr. Hogg: While I recognise that the problem is numerically probably quite unimportant, may I ask whether the Under-Secretary does not recognise that a serious point of principle is involved— that when immigrants come here they are expected to observe the laws of this country, which involves the proposition that a man has only one wife at a time?

Mr. Ennals: I think that that applies to the vast majority of immigrants, but the legal situation, as the right hon. and learned Gentleman knows, is that a marriage which is legal in the country in which it was undertaken and at the time it was undertaken is also considered legal in this country. It would be very difficult if it were otherwise.

Commonwealth Immigrants

Sir C. Osborne: asked the Secretary of State for the Home Department (1) why 2,115 men from India and 2,096 men from Pakistan were allowed to enter Great Britain under the Commonwealth Immigrants Act, 1962, in the month of April, 1968, in view of the fact that there were over half a million permanently unemployed persons, and many more on short-time employment; and if he will now stop all further immigration until those unemployed are provided with work;
(2) if he is aware that 1,321 children and 1,318 women from India, 448 children and 296 women from Jamaica, 919 children and 709 women from Pakistan entered Great Britain under the Commonwealth Immigrants Act, 1962, in the month of April, 1968, besides large numbers from other countries; and when he expects the flow of immigration to cease.

Mr. Ennals: The hon. Member's figures are of all admissions, including returning residents, visitors and others coming for temporary purposes, and ignore figures of departures. The number of those coming for settlement is much lower in every case. From the whole Commonwealth only 355 men arrived with employment vouchers in April. The majority of those coming for settlement were dependants.

Sir C. Osborne: Since unemployment is at its highest for 30 years and the Government are quite impotent to cure it, surely it is reasonable to expect that jobs at home should be safeguarded for our own people before any more are allowed in. I wish to press this matter. May I ask two supplementaries, Mr. Speaker?

Mr. Speaker: Two Questions answered together do not entitle the hon. Gentleman to two supplementaries.

Sir C. Osborne: Secondly, the Home Secretary—and I wanted him to reply— voted twice on Second Reading and Third Reading against the 1962 Act, which he is now implementing. Since he has changed his mind once, why cannot he change it a second time?

Mr. Ennals: It is, perhaps, too much to expect some hon. Members to be reasonable about this. I gave the hon. Member the figure. It was only 355 men who came in for employment in the month in question. The vast majority had skills such as those of doctors and nurses, which the country very much needs.

Mr. Brooks: Would not my hon. Friend agree that the great majority of recent immigrants have been taking jobs in which there is no shortage of vacancies and that the serious problem is not so much employment but the depression of


wage levels in such unattractive occupations as immigrants tend to take?

Mr. Ennals: It is quite certain that the small number of people who come in with vouchers largely come in for jobs for which the country has a substantial economic need.

Mr. Fisher: asked the Secretary of State for the Home Department whether he has considered the report of the International Commission of Jurists regarding the operation of the Commonwealth Immigrants Act, 1968, details of which have been sent to him; and if he will make a statement.

Mr. Ennals: The article in the Commission's bulletin to which the hon. Member refers does not add anything fresh to the arguments advanced in our debates earlier this year, when Parliament decided that legislation was justified.

Mr. Fisher: When such a distinguished legal body condemns the 1968 Act as violating human rights, creating second-class citizens, worsening race relations and legislating on racial lines, does not this make the hon. Gentleman wonder for a moment whether his Act was a wise and tolerant one and whether it should not be amended or modified?

Mr. Ennals: I have read the article with care, but I must point out that it is not a report by the International Commission of Jurists but an article published in their bulletin. I have no evidence that they as a body have made any pronouncements on this subject. I certainly would not reach the conclusions reached by the hon. Member. The Act is working effectively and it seems to me that the number of people who apply for vouchers can be properly dealt with.

Mr. Luard: Will my hon. Friend bear in mind that, quite apart from that expression of opinion by the International Commission of Jurists, the Act was the subject of considerable condemnation during the recent conference on human rights in Teheran and that it is considered by some people to be a violation of the Universal Declartion of Human Rights? In those circumstances, will my hon. Friend consider having further consultations with the Governments of India and Pakistan as it is now believed that the vast majority of these people

would prefer to go to India and Pakistan, and it might be possible to reach an arrangement with those Governments if we would relax our own restrictions?

Mr. Ennals: There is a later Question on the Order Paper concerning that matter to which the hon. Gentleman has directed his question. There have been criticisms, but this was carried by an overwhelming vote of the House. I would remind the hon. Gentleman of the words of the Solicitor-General in the debate:
… if the Bill is to be regarded as not being basically a refusal of entry Bill but a Bill for ordering the process of entry, it does not contravene the principles in international law referred to."—[OFFICIAL REPORT, 28th February, 1968; Vol. 759, c. 1580–2.]

Approved Schools (Teachers' Salaries)

Sir J. Vaughan-Morgan: asked the Secretary of State for the Home Department what safeguards there are for teachers in approved schools, whose schools are closed, for greater salary protection on the lines of those for teachers in maintained schools as in section Q2 of the Burnham Report.

Mr. Callaghan: The provisions in section Q of the Burnham Report relate to teachers in maintained primary and secondary schools who are affected by the closure or reorganisation of a school or department but who continue in the service of the same local education authority. There is no corresponding provision for teachers in approved schools because at present no comparable situation could arise.

Sir J. Vaughan-Morgan: Does not the Home Secretary realise that teachers in approved schools feel, and, indeed, are, at a considerable disadvantage compared with those who come under local education authorities? Is he, further, aware that he has had to have recourse to certain subterfuges to continue to pay for the staff in approved schools? Is it not time that this was regularised?

Mr. Callaghan: No, I do not think that there have been any subterfuges, but I would point out to the hon. Member that there is machinery for this purpose and we cannot settle these matters across the Floor of the House.

Sir J. Vaughan-Morgan: In view of the very unsatisfactory nature of the reply, I give notice that I will raise this matter in due course on the Adjournment.

Illegal Entry

Captain W. Elliot: asked the Secretary of State for the Home Deparement what proposals he has to tighten up security measures in order to prevent illegal entry into and out of Great Britain; and if he will make a statement.

Mr. Callaghan: All the responsible services are alert to this problem and co-operation between them is close. I shall keep the situation under continuing review.

Captain Elliot: That is a rather complacent Answer. Is the Home Secretary aware that numbers of crooks, espionage agents, illegal immigrants and even enterprising schoolboys get into and out of this country with or without papers and with forged papers, and that this is becoming increasingly irritating? Will he do something about it?

Mr. Callaghan: Even at the height of war, when the country was entirely sealed off from everyone else, it was impossible to prevent the situation to which the hon. and gallant Member refers. We have to make a balance here and I know that the authorities concerned are well aware of the point which the hon. and gallant Member makes.

Mr. Hogg: Would the Home Secretary take the opportunity to say what has happened about the widely publicised case of 29 Pakistanis who came in the other day? Are they the subject of charges, is the matter sub judice or what has happened?

Mr. Callaghan: There is a possibility of court proceedings, so perhaps I had better not comment further.

Brockhill Remand Centre

Mrs. Renée Short: asked the Secretary of State for the Home Department why he has decided to close the Women's Remand Centre in the Midlands: and what alternative arrangements are being made.

Mrs. Knight: asked the Secretary of State for the Home Department what

alternative arrangements he has made for accommodation in the Midlands for women and girls on remand, following his decision to close Brockhill Remand Centre to females.

Mr. Callaghan: I have reluctantly decided that Brockhill remand centre must be closed because it has proved impossible to provide the necessary nursing supervision. Alternative remand accommodation is being used at Pucklechurch, Risley and Holloway and overnight accommodation will be provided at Shrewsbury.

Mrs. Short: Is my right hon. Friend aware that this remand centre was opened when Winson Green prison was closed for women precisely to prevent their having to be taken as far as Hollo-way? Is he aware that this is extremely inconvenient, both for relatives and solicitors, and that the closure has been condemned by magistrates, social workers and probation officers? Will he, please, look at this matter again and find an alternative solution?

Mr. Callaghan: I will gladly continue to look for an alternative solution, but I cannot at the moment go back upon the decision to close Brockhill. There has been much publicity about it. I had hopes that that might attract trained nursing staff. Some local inquiries have been stimulated by the publicity and the deferment of the decision, but, alas, we cannot get the nursing staff there. The care of these women must be our first concern.

Mrs. Knight: In view of the overwhelming concern expressed throughout the area concerning the closure, will not the Home Secretary recognise that the information which he has so far received about this matter should be outweighed by the representations of the people on the spot?

Mr. Callaghan: I do not think that it should be. I have responsibility for the women who are committed to my care, and they cannot have the proper nursing attention. Despite all the efforts which have been made, some very recently and some thanks to publicity given by my hon. Friend and the hon. Lady, we still have not been able to recruit the necessary nursing staff. Some of the patients


concerned are emotionally and mentally disturbed. That must be my first care.

Mr. Dance: Is not the Home Secretary aware that nursing staff is available? One of the chief reasons why they do not come is that they have to walk about a mile and a half through a borstal centre. If there were a little more flexibility and taxis or some form of transport like that could be used, the Home Secretary could get nursing staff, both from Redditch and from Bromsgrove.

Mr. Callaghan: My information is not that of the hon. Member. A number of devices have been tried. I did not want to close the centre. It was started only three years ago, and it seems to me to be a failure that it now has to be closed, but I must have regard to the patients who are committed to my care.

Mrs. Knight: In view of the extremely unsatisfactory nature of the answers to the Question, I give notice that I shall seek to raise the matter at the earliest possible opportunity.

Long-Term Prisoners (Conjugal Visits)

Dr. Gray: asked the Secretary of State for the Home Department when he proposes to introduce overnight visits by their wives for those serving long-term sentences in Her Majesty's Prisons.

Mr. Callaghan: I am considering this and a number of other proposals in the report of the Advisory Council on the Penal System on the régime for long-term prisoners in conditions of maximum security but I have no announcement to make on this subject.

Dr. Gray: It is not the aim of a prison sentence to break up marriages, encourage homosexuality or punish innocent husbands and wives. Although I am

Number of persons convicted
Indictable offences


Year
Indictable and non-indictable offences
Motoring offences
Drunkenness offences
Number known to the police
Percentage not cleared up


(1)
(2)
(3)
(4)
(5)
(6)


1964
…
…
…
1,327,649
806,412
73,167
1,067,963
60·4


1965
…
…
…
1,368,048
840,374
69,005
1,133,882
60·8


1966
…
…
…
1,445,948
899,760
66,599
1,199,859
59·8


1967
…
…
…
1,579,653
1,002,133
71,654
1,207,354
58·8


Note: The figures in columns (3) and (4) are included in column (2).

extremely glad to know that my right hon. Friend is considering this matter, will he give it urgent attention and look at the example of Sweden and Mexico and introduce conjugal visits of this kind as soon as possible?

Mr. Callaghan: No, Sir, I cannot give that undertaking. The hypothesis on which my hon. Friend bases his question is susceptible to more than one interpretation. As Professor Radzinowicz' subcommittee said in its report in commenting on this matter,
the results of an ill prepared scheme could be disastrous.
I agree with that.

Mr. Carlisle: Will the Home Secretary realise that this is an extremely controversial proposal and that there are a great many strong practical arguments against permitting such visits? Will he, instead, consider making greater use of home visits by prisoners who are suitable for them?

Mr. Callaghan: I think that is a much more promising line of approach.

Undetected Crimes

Mr. Gwilym Roberts: asked the Secretary of State for the Home Department what statistics are available to him of the number of criminal, motoring and drinking convictions for the years 1964, 1965, 1966, and 1967; and what percentage of reported crimes was undetected in each of these four years.

Mr. Callaghan: As the Answer includes a number of figures, I will, with permission, circulate it in the OFFICIAL REPORT.

Following is the information from the Criminal Statistics:

Police Forces (Use of Manpower)

Mr. Gwilym Roberts: asked the Secretary of State for the Home Department if he will take steps to carry out a nation-wide organisation-and-methods inquiry into the use of manpower by the police forces, with the aim of cutting down the proportion of working time spent dealing with minor traffic offences, and concentrating more of the available manpower on crime prevention and detection.

The Under-Secretary of State for the Home Department (Mr. Elystan Morgan): Many forces have already taken advantage of O. and M. advice to make the most effective use of their resources, and the establishment of the Home Office Research and Development Branch is of further assistance. But it is for each chief officer of police to decide on the relative importance in his area of the different responsibilities that Parliament has laid on the police.

Mr. Gwilym Roberts: Does not my hon. Friend feel that such an inquiry is urgent in view of the high crime figures? Will my hon. Friend accept that such an inquiry might reveal that there is a strong case for setting up a separate "traffic cop" organisation to deal with traffic movement and prosecutions, leaving the other side of the police entirely free to deal with crime prevention and detection?

Mr. Morgan: Many forces have commissioned O. & M. studies either by local authority teams or by trained police O. & M. officers of various force departments. The statistics concerning crime show that the number of indictable offences known to the police continued to increase in 1967, but at a much lower rate than in 1966. The rate of increase was actually 0·6 per cent., the lowest since 1955.

Mr. Frederic Harris: Does the hon. Gentleman realise that I have raised this matter with the Home Office time and again over the last three years? There is strong public feeling that every available officer should be devoted to crime detection and prevention and not be wasted on these other duties which can be undertaken by others.

Mr. Morgan: It is not for me to say whether, where or when any particular police responsibility under the law should be given precedence over any other. This raises a question of substantial constitutional importance. The hon. Gentleman should not take for granted that the fact that officers should be diverted, for example, from minor traffic offences to more serious offences, of necessity makes those officers suitable for that specialist type of work.

Mr. Hogg: Whilst the hon. Gentleman will recognise that many will treat this as yet another reason for objecting to the curb on police recruitment, will he also see that the proposal from the benches opposite to split up the police force into specialised police forces would not go without challenge in this House?

Mr. Morgan: I am sure that the House is aware that traffic wardens are available to help the police with certain traffic functions. I do not think that the House should accept that a mere increase in manpower of necessity leads to direct beneficial results proportionate to the amount of manpower which has been channelled.

Mr. Paget: As we have now reached the stage at which it is probably fair to estimate that about one in 10,000 minor traffic offences results in prosecution, have we not reached the point at which the traffic law and its enforcement requires reconsideration?

Mr. Morgan: That is a totally different question and raises very much wider issues.

London Taxi Cabs (Fares)

Mr. Worsley: asked the Secretary of State for the Home Department (1) when he will make a decision on the application of the London Cab Trade for an increase in fares;
(2) when he plans to make regulations to fix fares from London Airport.

Mr. St. John-Stevas: asked the Secretary of State for the Home Department if he will now take action to check the abuse by taxi drivers of charging excessive fares from London Airport.

Mr. Ennals: I would refer the hon. Members to my right hon. Friend's reply


on 27th June to a Question by my hon. Friend the Member for Willesden, West (Mr. Pavitt).—[Vol. 767, c. 115.]

Mr. Worsley: As that Answer said that the matter will be referred to the Prices and Incomes Board, is it not another example of the Government shuffling off responsibility on to the Board? Ought they not to take a decision themselves, since the application is long overdue in view of Government rising costs?

Mr. Ennals: Not at all. The application would have been for an increase of about 11½ per cent. and it was proper that my right hon. Friend should refer it to the Prices and Incomes Board for its adjudication. Because my right hon. Friend has done that, it would certainly not have been appropriate to have raised fares for the longer distances.

Mr. St. John-Stevas: With regard to fares from London Airport, is there not a case for the Government taking immediate action to protect the good name of Britain and also the reputation of the cab industry, the majority of whose members condemn the activities and unscrupulous racketeering of an unrepresentative minority?

Mr. Ennals: It is because the Government take this view that they introduced the Measure that passed through the House a short time ago. I recognise that there is some evidence of excessive charging from London Airport, which is to be deeply regretted. I believe that it affects only a small minority of the taxi drivers concerned. To introduce new fares now would mean changes in meters, which would affect the amount coming into the pockets of the taximen at this moment when awaiting the report from the Prices and Incomes Board, which would be inappropriate.

Mr. Shinwell: Apart from the alleged abuses that operate at London Airport, how long is it since there has been a rise in taxi fares? Is it not a long time since there was an increase, and would not an increase do away with the obnoxious habit of tipping?

Mr. Ennals: The last increase was in 1964, but we must await the outcome of the report of the Prices and Incomes Board as to what will now arise.

Sir H. Lucas-Tooth: As this application was put in over a year ago, will the Minister say what his Department was doing during the period before it referred this application to the Prices and Incomes Board?

Mr. Ennals: I think that the hon. Gentleman is incorrect in the period of time that he gave.

University of Sussex (Proscribed Drugs)

Sir W. Teeling: asked the Secretary of State for the Home Department whether he will obtain from the Chief Constable a report on the steps which are to be taken to protect hoteliers and guest house keepers from the dangers of letting rooms to students of the University of Sussex who are in the practice of bringing in and leaving proscribed drugs in their rooms.

Mr. Elystan Morgan: No, Sir; but if the hon. Member is concerned about absolute offences under the law relating to dangerous drugs, I would refer him to the reply my right hon. Friend gave on 16th May to a Question by the hon. Member for Runcorn (Mr. Carlisle).— [Vol. 764, cc. 1391–2.]

Sir W. Teeling: Does the hon. Gentleman realise that at present the agreement with the University of Sussex has terminated and we are now starting a new one? The university is refusing to delete the clause that students should be allowed to bring male and female friends into their rooms in the hotels up to 11 o'clock at night. Does the hon. Gentleman realise—[Interruption.]

Mr. Speaker: Order. This is a Question about drugs.

Sir W. Teeling: I would point out that people sometimes take drugs and peddle drugs when they go to their rooms. The hoteliers are nervous about getting caught and being held responsible and the university will not help them. They have been told that the Government may bring in some Act to protect them.

Mr. Morgan: This question obviously raises matters of rather wider import than drugs. I have no reason to believe that the hon. Gentleman's sweeping allegations against the students are justified. I


would remind the hon. Gentleman that the full examination which my right hon Friend has set on foot, in conjunction with the Law Commission, will cover the whole sphere of absolute liability under the dangerous drugs laws. The need for legislation will be considered when this review is complete and also when the report of the Advisory Committee on Drug Dependance, concerning cannabis, is received.

Mr. Hogg: I realise that the review was only recently initiated, but will the hon. Gentleman accept that we on this side attach enormous importance to the danger of absolute liability attaching to people who are completely innocent? Will the hon. Gentleman do what he can to expedite the results of the review?

Mr. Morgan: I accept that.

Acquitted Persons (Costs)

Mr. Silvester: asked the Secretary of State for the Home Department whether he has completed his consultations on the question of giving further guidance concerning the basis on which costs are awarded to acquitted persons; and if he will make a statement.

Mr. Elystan Morgan: No, Sir.

Mr. Silvester: rose—

Mr. Morgan: I am sorry. The Answer should have been, "Yes, Sir". There is a slight difference.
Guidance on this question was given by the Lord Chief Justice in a statement in the Court of Appeal on 16th February, 1968, which my right hon. Friend brought to the notice of the courts. I am sending a copy to the hon. Member.

Mr. Silvester: I was about to say, "Not good enough", but perhaps I should say, "Thank you very much". I shall study what the hon. Gentleman sends me with close interest because there is great concern among people who have had costs awarded against them that they are in fact being punished even though they have been acquitted.

Polystyrene Tiles (Fire Hazards)

Mr. E. Rowlands: asked the Secretary of State for the Home Department (1) whether he will take steps to

place an immediate ban on the sale of polystyrene tiles which are not of the self-extinguishing type, in view of the fact that such tiles have been shown to have accentuated fires;
(2) what action is being taken to investigate the possible fire hazards from all types of polystyrene tiles.

Mr. Ennals: The Joint Fire Research Organisation is at present investigating the extent to which polystyrene tiles of both normal and self-extinguishing grades may contribute towards the spread of fire. Their report is expected in the autumn. On present information I do not think that a ban on the sale of polystyrene tiles of normal grade would be justified.

Mr. Rowlands: Is my hon. Friend aware of the growing evidence of the great danger of these tiles, if not causing fires, being a considerable hazard when one breaks out? Does not he think that while this review is going on we should bring to the attention of the public the danger of using these tiles which are becoming increasingly popular?

Mr. Ennals: I think that my hon. Friend is over-stating the case. There is no real evidence that polystyrene tiles have been a significant factor in accelerating the spread of fires in dwellings. I think that we must await the conclusions of the researches being carried out before we start making any announcements to the public.

Probation Officers (Official Secrets Act)

Mr. Brooks: asked the Secretary of State for the Home Department whether he is aware that his requirement that probation officers who work in prisons shall sign the Official Secrets Acts, restricts such officers' freedom to discuss their work; whether he will give the reasons for this requirement; and if he will make a statement.

Mr. Elystan Morgan: Access to confidential information in prison records necessarily involves the restrictions on unauthorised disclosure imposed by the Official Secrets Acts. There is no reason why this should inhibit probation officers from discussing their work with their professional colleagues and I have had


no representations that any difficulties have arisen in this respect. My right hon. Friend will, however, consider whether any general guidance is required to remove possible misunderstanding.

Mr. Brooks: I thank my hon. Friend for his assurance about the lack of restrictions on professional discussion. Would not he agree that it is wrong that free discussion within the community of the circumstances of prisons should be any more inhibited than, say, discussion of the conditions in geriatric hospitals?

Mr. Morgan: I should explain to my hon. Friend that the application of the Acts is not restricted to members of the prison service. Anyone working in a prison is subject to them. For example, local education authority teachers and Church Army representatives as well as probation officers are required to complete the declaration under the Official Secrets Acts to ensure that each person involved appreciates this.

Forgery Act, 1913

Mr. Lubbock: asked the Secretary of State for the Home Department if he will seek to amend the Forgery Act, 1913, so that frivolous prosecutions of persons in possession of play money cannot be brought.

Mr. Elystan Morgan: No, Sir. I think that consideration of any such amendment must await the outcome of the review of the law of forgery which the Law Commission has included in its recently published Second Programme.

Mr. Lnbbock: Has the hon. Gentleman's attention been drawn to the series of recent cases in which persons have been prosecuted and found guilty for having in their possession bits of paper bearing a remote resemblance to dollar bills? Is it not obvious that these were designed as political pamphlets, and could not be mistaken for real money? What steps does the hon. Gentleman propose to take to avoid the waste of time in the courts which is occurring as a result of these frivolous prosecutions?

Mr. Morgan: I am aware of one case, that of Stuart Christie, which is still sub judice. The fact that imitation money may be tendered for innocent purposes does not necessarily make it harmless.

We must afford adequate protection against imitation money, whatever the purpose for which it might be intended, being passed off as real.

Police Officers (Name Badges)

Mr. Whitaker: asked the Secretary of State for the Home Department whether he will now, as an experiment, provide name badges for police officers in place of numbers on their uniforms.

Mr. Callaghan: No, Sir. The Police Advisory Board recently considered this proposal but did not recommend it.

Mr. Whitaker: Would not my right hon. Friend agree that while the Police Federation understandably objects to its members being labelled with numbers, it would benefit both the public and the police if the former could be encouraged to regard the latter as individual human beings and not as symbols in uniform?

Mr. Callaghan: I think that that is the position now.

Sir Harmar Nicholls: Is the right hon. Gentleman aware that, whether they have names or numbers, we have a police problem under our noses in the Palace of Westminister, in that the police, having been on duty because of our erratic hours, are now being called on to do duty next Sunday—

Mr. Speaker: Order. That has nothing to do with the original Question.

Sir Harmar Nicholls: On a point of order. Mr. Speaker. Is it not in order to say that the Home Secretary should give attention to that rather than to numbers?

Mr. Speaker: The Question is about name badges.

Capital Punishment

Mr. Dance: asked the Secretary of State for the Home Department whether he will seek to reintroduce capital punishment for the crime of murder of police or prison officers in view of the long series of attacks on police and prison officers.

Mr. Callaghan: No, Sir.

Mr. Dance: What has the right hon. Gentleman in mind to protect police and


prison officers against those who have been put inside for real life, and against whom, at the moment, there is no sanction? What is the right hon. Gentleman going to do to protect these police and prison officers and help recruiting?

Mr. Callaghan: An increasing number of prison officers is being recruited, and I hope to recruit 1,000 new ones this year. I am glad to say that security for these officers is increasing substantially in prisons, and I am determined that they shall not have their position endangered by the change in the 1965 Act which Parliament, after a free vote, decided to make.

Immigration from East Africa

Mr. Hooley: asked the Secretary of State for the Home Department if he will now relax the stringency of the control over immigration into the United Kingdom of British subjects of Asian origin now resident in East Africa, in view of recent immigration trends.

Mr. Luard: asked the Secretary of State for the Home Department if he will review the control over immigration into the United Kingdom of British subjects of Asian origin from Kenya, in view of recent immigration figures.

Mr. Callaghan: No, Sir. There is no indication at present that the control is proving unduly stringent or that it is failing to meet the needs of those concerned.

Mr. Hooley: In view of the unfortunate consequences of this Act which has created a category of people with a nationality but no homeland, and which has been internationally condemned by certain important bodies, could we not at least indicate some generosity in the administration of the Act to mitigate its effect?

Mr. Callaghan: It might be better if we take notice of the practical consequences of the Act instead of theorising about it. It has restored order into this situation. The number of vouchers issued is well within the quota laid down by Parliament. The number of those taken up is even more within that quota. The number who have arrived amount to no more than a handful. Should we not regard it as something to rejoice in, rather than condemn, that we have restored

some order into the situation, and that people have had second thoughts about what had become a wild lemming-like rush?

Mr. Luard: Are not the figures in which my right hon. Friend takes such pride an indication that the Act was not necessary at all? May I press him on the point I made earlier to his hon. Friend? Will he now make some approach to the Governments of India and Pakistan to see whether some arrangement can be made by which the majority of these people in Kenya who wish to go to those countries are enabled to do so in return for some relaxation of our own restrictions?

Mr. Callaghan: I prefer not to comment on the discussions with India and other countries. I neither take pride in, nor am I ashamed of, these figures. It seems that we have achieved what we set out to do, namely, to introduce some order into the flow of immigrants into this country.

Mr. Hogg: As one of those who thought it right to support the right hon. Gentleman in the recent legislation, perhaps I might put a question to him. He set up a legal commission of some kind to go to East Africa. Can he give some indication, as a means of checking the pressure of immigration from that quarter, of how that commission is getting on, and what volume of work it has had to deal with?

Mr. Callaghan: I received representations from the two lawyers who kindly went out that there was not sufficient work for them because there were not sufficient appeals. One has returned home, and it seems as though the administration of the Act, as I expected, is being carried out in the fair and sensible way that the House would desire.

Visitors (Admission)

Sir Knox Cunningham: asked the Secretary of State for the Home Department whether he will refuse admission to the United Kingdom to those, whether students or others, who come with the declared intention of advocating the overthrow by force of the constitution of this country, or of otherwise disseminating sedition.

Mr. Wall: asked the Secretary of State for the Home Department what action he proposes to take to prevent known foreign agitators entering Great Britain.

Mr. Callaghan: I shall continue to consider cases individually on their merits.

Sir Knox Cunningham: Can the right hon. Gentleman say why the B.B.C. spent public money to bring "professional students" and agitators from abroad? How does this affect the good relations of Britain with the countries from which they come?

Mr. Callaghan: I am not answerable for the B.B.C. What I have to determine is whether somebody who wishes to come to this country is likely to attempt to overthrow the constitution by force. I have not so far reached that conclusion in relation to those invited to come by the B.B.C.

Mr. Rose: Is my right hon. Friend aware that it is possible in this country and in this House to make speeches in support of sedition, rebellion, and treason against the Crown, and will he therefore, in the interests of free speech and fair play, resist the pressure of those of my hon. Friends who would wish to silence the hon. and learned Member for Antrim, South (Sir Knox Cunningham) and his fellow supporters of the Rhode-sian Front?

Mr. Callaghan: Yes, Sir, I think I can give that assurance.

Sir Knox Cunningham: On a point of Order. Owing to the unsatisfactory nature of that reply, I shall raise the matter again

Tear Gas

Mr. Macdonald: asked the Secretary of State for the Home Department what instructions he has given to the Metropolitan Police about the use of C.S. gas; and if he will call for reports from all chief constables about the instructions in the use of C.S. gas that they have issued to forces under their control.

Mr. Callaghan: The instructions given to the Metropolitan Police about the use of C.S. gas have not been altered since the statement made to Parliament

on 20th May, 1965. The basic requirement is that tear gas equipment shall be used only in circumstances similar to those in which the issue of conventional firearms to police is authorised—that is, to effect the arrest of armed besieged criminals or violently and dangerously insane persons. I am seeking the other information and will write to my hon. Friend when it is available.

Mr. Macdonald: Has my right hon. Friend seen reports which show that there is some evidence to suggest that scientific opinion considers that this substance can be lethal in confined quarters? At least until this question is determined, will he ensure that this substance is not used for purposes of restoring order in cases where other means—such as tear gas—may properly be used?

Mr. Callaghan: This is known to be a potent substance, and when the Home Office working party originally recommended its use it was with that in mind. But it was also considered to be less toxic and less likely to cause damage than other gases. I have made inquiries into the number of occasions on which this gas has been used and I can assure my hon. Friend and the House that they are very rare, because the consequences are known to be serious.

Mr. Goodhart: Do any of our police forces have plans for acquiring the chemical spray called Mace, which has been used with effect by some police forces in America for quieting dangerous criminals?

Mr. Callaghan: Perhaps the hon. Gentleman will put down a Question on that subject.

Mr. John Lee: If this gas is rarely used and if there are doubts about its effects, but there is some evidence to suggest that they can be very serious, why has my right hon. Friend authorised its use at all?

Mr. Callaghan: Because there may be occasions when it would be extremely dangerous for the police to operate without it.

Mr. Eldon Griffiths: Is it not misleading to suggest that this gas has been or might be used for maintaining public order? Is it not a fact that it is used,


if ever, solely for the purpose of assisting the police in an emergency situation concerning dangerous people?

Mr. Callaghan: I have not heard that suggested this afternoon, and it would be misleading so to suggest. I repeat what I said in my original Answer, namely, that it is to effect the arrest of armed besieged criminals, or violently and dangerously insane persons. I repeat that the number of occasions on which it has been used are insignificant.

Police and Fire Officers (Court Conviction)

Mr. Scott-Hopkins: asked the Secretary of State for the Home Department what action is taken after conviction in a court following a breathalyser test in respect of those serving in the police forces and fire brigades.

Mr. Elystan Morgan: Under the Police and the Fire Service Discipline Regulations, this is a matter within the discretion of the respective chief officers.

Mr. Scott-Hopkins: Can the hon. Gentleman assure the House that there will be no second punishment for the one crime committed, and will he give instructions to see that that is so?

Mr. Morgan: Perhaps I should explain that criminal conduct—that is to say, where an officer has been found guilty by a court of law of a criminal offence—is a specific offence under the Police (Discipline) Regulations, 1965. A disciplinary charge would not, however, follow automatically as a result of a court conviction. It is for chief constables, who have discretion in the matter, to decide whether a disciplinary charge should be brought. The situation with regard to the Fire Service closely approximates that with regard to the police.

Children (Inflammable Nightwear)

Mr. Dempsey: asked the Secretary of State for the Home Department what further consideration he has given to introducing regulations to reduce the number of burning accidents to children as a result of wearing inflammable night-wear, following the deliberations on this matter by the Working Party on Flammable Clothing; and if he will make a statement.

Mr. Ennals: Recommendations relating to children's dressing-gowns are now being prepared. In respect of nightwear material sold by the yard, a voluntary scheme has been evolved under which retailers will be invited to display appropriate warning notices for the guidance of their customers.

Mr. Dempsey: Is the Minister aware that a number of these tragic burning accidents have happened to school girls wearing night attire manufactured in dressmaking classes? Will he prevail upon the Secretary of State for Education and Science and the Secretary of State for Scotland to prohibit the use of such inflammable materials in dressmaking classes at schools?

Mr. Ennals: All children's nightdresses offered for sale are required to be made of flame-resistant material. I will look into the question with my right hon. Friend.

Visiting Forces Act, 1952 (Private Tupper)

Mr. Frank Allaun: asked the Secretary of State for the Home Department why he complied with the request of the United States service authorities that Private Tupper should be arrested by the Metropolitan Police under the terms of the Visiting Forces Act, 1952.

Mr. Elystan Morgan: The Act provides that, at the request of any country to which it applies, the police may arrest a deserter from the forces of that country, with a view to his return to the jurisdiction of the appropriate service authorities. The United States is a country to which the Act applies, and I found no reason to advise the Commissioner of Police that the procedure under the Act should not be complied with.

Mr. Allaun: But was not Mr. Tupper really a political refugee who should have been granted political asylum in accordance with the traditions of our country? Have not other N.A.T.O. countries, notably Sweden, Holland and France, granted such asylum and not handed men over to the American Forces?

Mr. Morgan: Sweden is not a N.A.T.O. country. There is no evidence at all of political or conscience connections in this case. Private Tupper was enlisted in the United States Army for


two years on 25th October, 1966. He went absent without leave from his unit in Fort Irwin, California, on 31st August, 1967.

CHEMICAL AND BIOLOGICAL WARFARE

Ql. Mr. Dalyell: asked the Prime Minister if he will take the initiative in proposing to President Johnson and Premier Kosygin that there should be an international conference to consider the revision and updating of the Geneva Protocol covering chemical and microbiological warfare.

The Prime Minister (Mr. Harold Wilson): I would refer my hon. Friend to the Answer given to a Question by him on 1st July by my right hon. Friend the Minister of State for Foreign Affairs. —[Vol. 767, c. 167.]

Mr. Dalyell: When the Geneva Conference reconvenes on 16th July shall we be raising these complex problems of inspection and verification?

The Prime Minister: It is certainly our intention when the Committee reconvenes on 16th July—we are now examining all the issues that we think it should consider and we have been devoting particular attention to the question of chemical and biological weapons.

Mr. Emrys Hughes: Is my right hon. Friend aware that there is growing interest in the question of microbiological and chemical warfare? Does not he think that there should be a departure from the Conservative Administration's policy, and a transfer of the Porton establishment to the Ministry of Health?

The Prime Minister: I have considered whether it should be transferred to the Ministry of Health but I am satisfied that in present circumstances it should not be. I agree that there is great interest in the subject and that this interest has increased recently, but I do not feel that it would be right to transfer responsibility from the Secretary of State for Defence.

Mr. Hughes: On a point of order. In view of the unsatisfactory nature of that reply I shall try to raise the matter on the Adjournment.

EXPORTS (REDEPLOYMENT OF LABOUR)

Mr. Marten: asked the Prime Minister whether in the light of the unemployment figures, he is satisfied with the co-ordination between Ministers dealing with the redeployment of labour and the needs of the export drive.

The Prime Minister: Yes, Sir.

Mr. Marten: Since the number of wholly unemployed has been above the half million mark for the last 14 months, how can the right hon. Gentleman say that he is satisfied? Can he say what level of unemployment he regards as full employment, and when he hopes that that position will be achieved?

The Prime Minister: As the hon. Member knows, the position is that with all the efforts which have been made, and the new situation, there are abundant opportunities for our manufacturers to get export orders. Many are showing great success in doing so. This will involve taking on more labour in order to fulfil those export orders.

Mr. Mendelson: Whilst recognising that redeployment is working successfully to some extent, does not my right hon. Friend accept that the general level of unemployment is disturbingly high for this time of the year? Will not he now consider taking further measures to reduce unemployment by encouraging an increase in consumption?

The Prime Minister: It is too high, but I believe that the right way to get it down is by deployment in the export field, for which there are abundant opportunities. I would not support any proposals—nor would hon. Members opposite—for increasing home consumption and going in for an import boom when it is an export-led expansion that we need.

Mr. Maudling: Does not the Prime Minister recall that, in his Budget speech, the Chancellor said that the Government had no intention of creating unemployment in advance of the demand of export industry? He referred to not digging a hole before they could fill it in. Is not that precisely what is happening?

The Prime Minister: In fact, my right hon. Friend's reference to digging the hole was originally made last November. As to the position since the Budget, there has been very little change in the level of unemployment, but the number of export opportunities has greatly increased. I thought that, if right hon. Gentlemen opposite had any criticism, it was that we had allowed too much home market consumption.

INDUSTRIAL EFFICIENCY

Mrs. Renée Short: asked the Prime Minister if he will co-ordinate the activities of the Secretary of State for Employment and Productivity and the President of the Board of Trade in their efforts to improve industrial efficiency.

The Prime Minister: My right hon. Friends already work closely together on this, as on other matters, Sir.

Mrs. Short: But does not my right hon. Friend think that it is rather odd that one Minister should employ a gentleman from Rootes to set up a department to advise on productivity, while the President of the Board of Trade is able to find half a million pounds for grants to small firms in Bristol and Glasgow to enable them to get advice from private firms about industrial efficiency? Why cannot Mr. Cattell's department advise firms in Bristol and Glasgow?

The Prime Minister: Both these proposals are extremely important and are right. In the case of the gentleman previously employed by Rootes, my hon. Friend will know of the highly successful productivity agreement worked out at Rootes. We want to see more of them since this is the best way of dealing with prices, incomes and productivity. But there are small firms which could benefit from industrial consultants' advice, and we are trying this pilot scheme in the Glasgow and Bristol areas.

Sir T. Beamish: What is the point of improving industrial efficiency when both employment and exports can so easily be affected when gratuitous insults are offered to friendly Governments?

The Prime Minister: I thought that that matter was fully and satisfactorily dealt with by my right hon. Friend yester-

day. Obviously, it was not to the satisfaction of the hon. Gentleman, but that is a compliment to some of us.

CABINET OFFICE AND GOVERNMENT DEPARTMENTS

Mr. G. Campbell: asked the Prime Minister if he will take steps to reshape the Cabinet Office and reduce the number of Ministries and governmental bodies.

The Prime Minister: These matters are kept under continuous review, but I have no statement to make today.

Mr. Campbell: Besides achieving some necessary streamlining, would not this proposal also help the Prime Minister by sparing him the tedium of having to replace senior Ministers as they resign on deciding that they no longer wish to serve?

The Prime Minister: Such matters are not unprecedented. I remember a whole Treasury team resigning when the Conservative Government were in power— all three Ministers. I remember the then Prime Minister sacking half his Cabinet —the wrong half, as it turned out. So far as the machinery of Government is concerned, the hon. Gentleman will know that the already announced decisions involve the merger of four Departments into two. This is in addition to other changes which have been made.

Mr. Hector Hughes: Is it not already the case that hon. Members having financial interests in any matter under discussion declare their interest?

The Prime Minister: Yes, Sir, I think that that is the practice of the House. It is more relevant, I think, to a later Question.

Mr. Maudling: Can the right hon. Gentleman assure the House that present methods of Cabinet Government command the support of all his colleagues?

The Prime Minister: Yes, Sir.

Mr. George Brown: Without wishing to add to the Prime Minister's difficulties, may I ask whether he will make it clear that the team which resigned then was


of quite a different calibre from the one which has resigned now?

The Prime Minister: I did not say that they resigned; I said that they were sacked.

Mr. John Hynd: Can my right hon. Friend give the House an estimate of the number of new Ministries which the party opposite has proposed over the last 12 months?

The Prime Minister: No, Sir, I do not follow all their successive policy statements. Since this Government were formed, however, two Departments have been abolished and three new ones created—[An HON. MEMBER: "Three?"] They are the Welsh Office—I do not know whether it is Conservative policy to abolish the Welsh Office—the Ministry of Technology and the D.E.A. Aviation has gone, quite unlamented, and the Colonial Office has gone. As a result of further action to be taken this year, the Foreign Office and the Commonwealth Office will be merged, as, of course, will the Ministries of Health and Social Security.

Mr. Gwynfor Evans: May I urge upon the right hon. Gentleman that a way of reducing the number of Ministries which would greatly benefit the people of Wales and Scotland would be to establish Welsh and Scottish government?

The Prime Minister: That would certainly be of no benefit to the people of Wales or Scotland.

DEBATES (MEMBERS' FINANCIAL INTERESTS)

Mr. Brooks: asked the Prime Minister whether he will introduce legislation to ensure that Members of either House who have financial interests in a matter under debate, shall be henceforth in the same position in terms of voting rights as those elected members of local authorities who are barred from voting on council rents because of their residence in local authority dwellings.

The Prime Minister: No, Sir, any change in the present arrangements would be a matter for the House as a whole and not for me.

Mr. Brooks: But would my right hon. Friend not agree that it is wholly anomalous that we fully trust Members of this House to behave at all times honourably and sometimes even right honourably, while we apparently believe that only the elected members of local authorities are capable of sinister skulduggery?

The Prime Minister: My hon. Friend will be aware that, under legislation introduced by this Government, since January, 1967, any member of a local authority who is a council house tenant has been able to vote on a matter of general housing policy, but not on a specific question affecting his own tenancy. As to this House, I have heard no suggestion in any votes or speeches, even recent ones, of dishonourable motivation. Some of the votes have not been very sensible, but they have been honourable.

Sir D. Walker-Smith: While suggesting no dishonourable motivation on the part of any hon. Members, may I ask whether the Prime Minister would agree that there is, on the face of it, a marked discrepancy between the rules governing this matter in Parliament and those under Section 76 of the Local Government Act of 1933, which are far more stringent? Would it not be in the interests both of the House of Commons and of local government that these matters should be objectively and dispassionately considered?

The Prime Minister: It was because we felt that it was an anomaly that we amended the appropriate Section of the Local Government Act. There is this difference. This House is a legislature, whereas the members of a local authority are an executive as well as, in certain cases, a legislature. There is that difference. As far as the House is concerned, any changes thought desirable —I am not aware of any in this respect —would be a matter for the whole House.

PRIME MINISTER (TELEVISION BROADCAST)

Earl of Dalkeith: asked the Prime Minister whether he will make a national television broadcast giving a progress report on the state of the economy at the end of the first six-month period since


devaluation of the £ sterling and its effect upon the living standards of the population.

Mr. Bruce-Gardyne: asked the Prime Minister when he intends to make his next Ministerial television broadcast; and if he will give an assurance that he will do so before the end of the present Session.

The Prime Minister: I have nothing to add to the Answers I gave to Questions on 2nd July, Sir.—[Vol. 767, c. 1299–1301.]

Earl of Dalkeith: When the right hon. Gentleman does steel himself to make another broadcast, could he, as the most incredible leader of the most incredible Government which we have ever had, aim to restore public confidence in Parliament by dropping his very convincing act of being a man totally devoid of integrity and, at the same time, in relation to his devaluation broadcast, admit quite openly—[Interruption.]

Mr. Speaker: Order. Questions must be brief.

Earl of Dalkeith: In relation to his devaluation broadcast—[Interruption.]— would he openly admit that he either made a gross miscalculation, misled the people or at best had been over-economical with the truth?—[Interruption.]

The Prime Minister: I could not hear the noble Lord's last few words, but if they were no better than the earlier ones, they are not worth answering. Perhaps he would let me hear his last few words about my devaluation broadcast.

Mr. Eldon Griffiths: On a point of order. The right hon. Gentleman said that he did not hear the last few words spoken by my noble Friend. May I tell him what my hon. Friend said—

Hon. Members: No.

Earl of Dalkeith: On a point of order. My last few words were: would the right hon. Gentleman honestly and openly admit that he had either made a gross miscalculation in his devaluation broadcast or had deliberately misled the people or, at best, had been over-economical with the truth?

The Prime Minister: No, Sir. I would first suggest that, if the noble Lord wants

lessons in selective misrepresentation, his hon. Friend the Member for Bury St. Edmunds (Mr. Eldon Griffiths), who is sitting next to him, would be very good at giving them, to judge from his selection of figures in his article last week. The noble Lord, however, needs no lessons from anyone. The position is that, in my devaluation broadcast, I said that prices will rise—[Interruption.]—I said that prices will rise. On Tuesday I informed the House that, on the Financial Times index, in their view, they had increased less than most of us expected.

Mr. Bruce-Gardyne: We realise that the Chancellor has placed a ban on personal appearances by the Prime Minister on television, and, in view of the state of the foreign exchange markets, this is no doubt just as well, but, in the light of the ex-Minister of Power's television appearance earlier—[Interruption.]

Mr. Speaker: Order. The House wants to hear these exchanges.

Mr. Bruce-Gardyne: I was about to ask whether, in the light of the ex-Minister of Power's television broadcast earlier this week, the Prime Minister would not, just for this occasion, ask for the right of reply on behalf of the intellectuals.

The Prime Minister: The hon. Member's Question was preceded by an assertion which is quite false. There has been no ban whatsoever placed on my going on television.

Hon. Members: Oh.

Mr. Speaker: Order. The other half of the House wants to hear the reply.

The Prime Minister: The hon. Member preceded his question with inaccurate statements. He should withdraw the statements before he expects his rather stupid question to be answered.

Mr. Dickens: May I ask the Prime Minister a serious supplementary question. Does he not agree that the considerable increase in exports since devaluation has, unfortunately, been offset by two basic weaknesses—namely, the heavy increase in the volume of imported manufactured goods and the substantial private outflow of capital to advanced countries in the sterling area, most notably to Australia to buy gold mining


shares and other shares? Does not the Prime Minister feel that we should bring in selective short-term import controls and put a ban on the private capital outflow at least until the balance of payments is again in surplus?

The Prime Minister: My hon. Friend is aware that I answered that question when it was put by one of my hon. Friends last week, and I then gave my reasons against accepting either of those remedies. I agree that the very great increase in exports and the even larger increase in export orders has been matched in the last few months by rising imports about which, as I said, no one is complacent. We have to see how far the measures which we have taken will deal wi:h the situation. I certainly do not agree that the use of import controls as proposed by my hon. Friend is the right way to deal with the situation.

Sir W. Bromley-Davenport: On a point of order. The Prime Minister referred to a supplementary question asked by my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) as being stupid.

Hon. Members: Oh.

Mr. Speaker: Order. I am being addressed on a point of order. Sir Walter Bromley-Davenport.

Sir W. Bromley-Davenport: If it is out of order to refer to answers given by Ministers as being stupid, why is it in order for the Prime Minister to call questions asked by my hon. Friends stupid? If he is allowed to do that, surely we should be allowed to call all the Prime Minister's answers stupid, and—

Hon. Members: Oh.

Mr. Speaker: Order. The hon. and gallant Member must be allowed to complete his point of order. Sir Walter Bromley-Davenport.

Sir W. Bromley-Davenport: I apologise if I was not heard. If it is out of order for us to call answers given by Ministers stupid—

Mr. Speaker: Order. I said that the hon. and gallant Member must be allowed to complete his point of order— not that he must be allowed to repeat it.

Sir W. Bromley-Davenport: Is it in order for the Prime Minister to refer to a question asked by one of my hon. Friends at Question Time as being stupid?

Hon. Members: Yes.

Mr. Speaker: Order. The hon. and gallant Member asks whether it is in order to refer to a question as stupid. It is in order. The hon. and gallant Member, I think, is hypersensitive.

AIRCRAFT ACCIDENT (LONDON AIRPORT)

Mr. Burden: (by Private Notice)asked the President of the Board of Trade whether he will make a statement regarding the crash at London Airport yesterday afternoon of an Ambassador aircraft of B.K.S. Airlines resulting in the death of six people.

The Minister of State, Board of Trade (Mr. William Rodgers): An Ambassador aircraft operated by B.K.S., and engaged in flying horses and grooms from Deauville to London Airport, crashed into the side of the new North-East Face Building at 17.28 hours yesterday, killing the three crew members and three of the passengers. The remaining two passengers were injured and are in hospital. In addition, four airport employees were injured and a further 11 members of B.E.A. staff are being treated for shock. All the horses were killed as a result of the accident.
The weather was fine and sunny and the aircraft made a normal approach to land until it was about 200 feet above the area of the airport boundary. A few seconds afterwards the port wing dropped and inspection of the airfield shows that the port wing tip and later the port main wheel touched the grass for a distance of about 200 feet. The aircraft then became airborne again, banking to the left and with the nose rising, travelling straight towards the North-East Face Building.
Whilst steeply banked, the port wing and undercarriage struck two B.E.A. Tridents parked on the apron, which resulted in the port wing of the Ambassador being torn off and severe damage to the two Tridents—one may be a


write-off. The Ambassador rolled over on its back and crashed into the ground floor of the North-East Face Building.
The aircraft caught fire immediately upon impact with the first Trident and separate fires in the main wreckage, the severed wing and in a damaged Trident had to be dealt with.
The Chief Inspector of Accidents instituted an investigation immediately.
May I express sympathy with the relations and friends of those who lost their lives and wish a speedy recovery to those who were injured.

Mr. Burden: I am sure that every hon. Member wishes to associate himself with the Minister's remarks about those who lost their lives or were injured.
We shall await the result of the investigation to see whether there is any evidence of a mechanical fault or whether, perhaps, the horses which were in the aircraft for some reason or another broke away or were partly responsible for the crash.
I am sure that the Minister will agree that the House should convey to the airport police and fire services praise for the remarkable speed and efficiency with which they appeared at the scene of the crash.

Mr. Rodgers: I am very glad to do that. I understand that the fire and crash services were alerted before the plane finally crashed. Although this is the wrong time, as the hon. Member will agree, to speculate on the causes of the accident, in view of some of the reports perhaps the House would like to know that one of the survivors said that the horses were calm and placid at all times.

Mr. Rankin: Is my hon. Friend aware that in my view this disaster pinpoints two major problems? The first is the congested nature of Heathrow and the importance of giving first priority to whatever further development has to be undertaken at that airport. The second is that time is no longer on our side with regard to a decision on a third London airport.

Mr. Rodgers: It is much too soon to draw any conclusions about what were the reasons for the crash, but I note the burden of my hon. Friend's remarks.

Mr. Fortescue: May I add the sympathy of hon. Members on this side of the House to that expressed by the Minister? The hazards to passengers and crew of planes flying with unboxed live animals are obviously much greater than those to passengers on normal passenger flights. Would the Minister tell us whether there are any special safety regulations covering these flights and, if not, whether he considers that such regulations should be introduced?

Mr. Rodgers: Yes, Sir. I am sure that when the investigation has been completed, questions of this kind will be considered. Perhaps I should add that I understand that the aircraft was specially modified for the carriage of horses and that there is no evidence that the horses in any way contributed to the disaster.

Sir A. V. Harvey: Would the Minister bear in mind that the design layout of London Airport necessitates all activities being based on the centre of the airport? In view of the rapid growth of activities towards the runways, will be ask the airport authorities to review the parking of aircraft and the safety margins between the runways and these activities?

Mr. Rodgers: I appreciate the point that the hon. Gentleman made. I believe that my hon. Friend the Member for Glasgow, Govan (Mr. Rankin) had the same question in mind. I assure the House that the matter will certainly be looked into.

BUSINESS OF THE HOUSE

Mr. Heath: May I ask the Leader of the House whether he will state the business of the House for next week?

The Lord Privy Seal and Leader of the House of Commons (Mr. Fred Peart): Yes, Sir. The business for next week will be as follows:
MONDAY, 8TH JULY—Supply [24th Allotted Day]:
Debate on the Industrial Reorganisation Corporation, which will arise on an Opposition Motion.
At seven o'clock the Chairman of Ways and Means has named the Bristol Corporation Bill [Lords] for debate.
Motions relating to the Selective Employment Payments Variation Order and the Abortion Regulations.
TUESDAY, 9TH JULY—Remaining stages of the Race Relations Bill.
WEDNESDAY, 10TH JULY—Remaining stages of the Hovercraft Bill, and of the British Standard Time Bill [Lords].
Lords Amendments to the Health Services and Public Health Bill and to the Justices of the Peace Bill, and if there is time, remaining stages of the Theft Bill [Lords].
THURSDAY, 11TH JULY—Supply [25th Allotted Day]:
Debate on Agriculture, on a Motion for the Adjournment of the House.
Prayer on the Motor Vehicles (Driving Licences) (Amendment) Regulations 1968.
FRIDAY, 12TH JULY—Motions relating to the Supplementary Benefit (Determination of Requirements) Regulations and to the British Steel Corporation Borrowing Powers.
MONDAY, 15TH JULY—Supply [26th Allotted Day]:
Debate on a topic to be announced later.
Motion on the Southern Rhodesia (United Nations Sanctions) (No. 2) Order.

Mr. Heath: Does the right hon. Gentleman recall that on 30th May he gave me a firm assurance that the Government would provide time for the House to debate a Prayer on the Prices and Incomes (General Considerations) Order? As the Government have refused to grant time next week, will he now reaffirm his assurance that we shall be given time in the very near future for the debate which he promised?
We are getting near to the Summer Recess. Will the right hon. Gentleman assure the House that he will take into account, in working out the allocation of Parliamentary time, the need for debates on the Donovan Report, on the Defence White Paper, when published, and on the economy in general?

Mr. Peart: The answer to the first part of the right hon. Gentleman's question is, "Yes". The answer to the second part, about the Donovan Report, is "No". The answer to the third part, on the Defence White Paper, is "Yes".

Mr. Heath: I asked a further question, about a debate on the economy generally.

Mr. Peart: I will have that point brought to the notice of my right hon. Friend who is responsible, but I cannot give a specific promise at this stage. [HON. MEMBERS: "Why not?"] We will have talks about it.

Mr. Heath: The right hon. Gentleman gave a curt "No" to my request for a debate on the Donovan Report. Is he aware that this matter is of the utmost importance to all hon. Members and that as the Government are no doubt embarking on the preparation of legislation for next Session there should be a full debate on this subject so that the House may express its view before we rise for the Summer Recess?

Mr. Peart: I was not being curt. I was trying to be precise, and as I had answered simply "Yes" to the right hon. Gentleman's other two questions, an answer which he appreciated, I thought that a precise "No" would be satisfactory for the other question. However, if the right hon. Gentleman wants me to consider the matter, I will certainly look into it, but I do not think that time can be found next week. I would rather be frank with the right hon. Gentleman now than later. [Laughter.]

Mr. Speaker: Order. Mr. Thorpe.

Mr. Thorpe: Would the right hon. Gentleman agree that while Friday is a useful Parliamentary day, the Government try to avoid bringing in highly controversial matters for discussion on Fridays, for reasons which the whole House will appreciate? He is now suggesting that on Friday, 12th July, we should discuss a further £100 million of public money being granted to the British Steel Corporation. Has it crossed his mind that this may be a matter of some controversy? Is he aware that when, in 1967, a comparable Instrument was introduced for the gas industry it took six and a quarter hours to debate it on two Parliamentary occasions?
Is the right hon. Gentleman further aware that the other matter to be taken on Friday, 12th July, Motions relating to the Supplementary Benefit (Determination of Requirements) Regulations, is also one on which many hon. Members


will have much to say? Does he think that two controversial though extremely interesting Measures should be introduced on a Friday?

Mr. Peart: Friday is still an important Parliamentary day. There have been precedents for controversial matters being debated on Fridays. I have noted what the right hon. Gentleman has said, but the business for next week has already been arranged.

Several Hon. Members rose—

Mr. Speaker: Order. I remind the House that the Report stage of the Finance Bill finishes at seven o'clock. I hope, therefore, that hon. Members will show some restraint at Business question time.

Mr. Victor Yates: Has my right hon. Friend seen the Motion standing in my name and in the names of 49 other hon. Members about the dispute between the clerical workers and the British Steel Corporation?
[That this House is profoundly shocked at the continuing dispute between the British Steel Corporation and the members of their clerical, administrative and technical staffs following the refusal of the Corporation to allow their staff to be represented by a union of their own choice; and calls upon the Government to take the necessary action to try to end this dispute.]
Is my right hon. Friend aware that we read in the Press this morning about the Minister having agreed to the establishment of a court of inquiry into this matter? Would not he agree that the House should have been informed about this, rather than having to read about it in the Press or about any other statement or discussions about a strike which should never have been allowed to continue?

Mr. Peart: Although not a matter concerning the business for next week, my hon. Friend will appreciate that we have made an announcement to set up a court of inquiry. I would have thought that it would be sensible to await the report of that inquiry; but I will convey my hon. Friend's views to the Minister responsible.

Sir C. Taylor: Will the right hon. Gentleman give up-to-date information on a matter about which both sides of

the House are deeply interested, namely, whether we can expect the resignation of the Prime Minister?

Mr. Ted Fletcher: Further to the question asked by my hon. Friend the Member for Birmingham, Ladywood (Mr. Victor Yates), will a statement be made in the House by the Minister about the composition of the court of inquiry that is to be set up to intervene in the dispute between the clerical workers and the British Steel Corporation?

Mr. Peart: I have already answered that question. I said that I would convey these views to my right hon. Friend.

Dame Irene Ward: Has the right hon. Gentleman noticed my Motion, dealing with Guy's Hospital?
[That in the opinion of this House the matron of Guy's Hospital would not resign without weighty cause and that as hospital administration, the immediate and long-term interests of patients and the conditions of service of the nursing profession may be involved it is appropriate that an independent inquiry be held and its report published so that professional interests and the public may know the truth of the situation which has caused the resignation.]
Will he ask the Minister of Health whether, when he answers my Question next week, he will be prepared to give the House some real facts so as to allay public anxiety about what is going on at the hospital?

Mr. Peart: I will certainly convey the hon. Lady's views to my right hon. Friend.

Mr. Hugh D. Brown: Am I right in assuming that there has been a tradition in the House of at least one Supply day being provided by the Opposition for the discussion of Scottish affairs? Will my right hon. Friend use his influence to persuade the Opposition to set aside Monday, 15th July, so that we can discuss the possible disappearance of two firms that are household names of blessed memory in shipbuilding and engineering, Harland and Wolff and Beardmore?

Mr. Peart: It is not for me to advise the Opposition about Supply days or their subjects. That is a matter for the Opposition. I cannot intervene in the Matter.

Mr. Godber: Would the right hon. Gentleman give a firm assurance that the long-awaited statement on the fishing industry will be made next week?

Mr. Peart: Yes, Sir. My right hon. Friend hopes to make a statement on the industry next week.

Mr. Mendelson: May we have a firm assurance that there will be an adequate foreign affairs debate before the Summer Recess? In other words, would my right hon. Friend reaffirm his plan not to wait for the last week before the Recess for such a debate, but that it will take place earlier? Does he accept the principle that each day of the debate should be devoted to a separate subject, and, in particular, that one day should be devoted to a debate on Vietnam, which the House has not specifically debated for two and a half years?

Mr. Peart: I appreciate my hon. Friend's remarks. I agree with him in principle. I would certainly like to have a debate on foreign affairs before the Recess, but I cannot be precise about the subjects.

Mr. Hastings: When are we to debate the Fulton Report?

Mr. Peart: Not next week.

Mr. Whitaker: As the House has already spent many hours in debating the Divorce Reform Bill and the Sunday Entertainments Bill, can my right hon. Friend give an assurance that there will be sufficient time before the end of the Session for the House to reach an opinion on them one way or the other?

Mr. Peart: I cannot be specific on this subject at this stage, but I will gladly talk to my hon. Friend about it.

Mr. Blaker: Will the Leader of House ask his right hon. Friend the President of the Board of Trade whether he will make a statement next week about the Government's policy towards the proposal of the French Government for import quotas and export subsidies?

Mr. Peart: I will certainly convey the hon. Member's views to my right hon. Friend.

Mr. Archer: Does my right hon. Friend recollect Motion No. 271, on the peaceful uses of the ocean floor, and his very

kind answer to me on 9th May? As this matter has since been under continual discussion in the Technical Committee of the United Nations and the United Kingdom has rather given the appearance of being more impressed by the difficulties than by the advantages, may the House have an early opportunity of debating the advantages?
[That this House believes the time has come to declare the deep ocean floor conserved as a common heritage of mankind, and that steps be taken to draft a treaty embodying inter alia the following principles:
that the seabed beyond the limits of present national jurisdiction,

(a) be conserved against appropriation by nations or their nationals so that the deep ocean floor should not be allowed to become a stage for competing claims of national sovereignty
(b) be explored in a manner consistent with the principles and purposes of the Charter of the United Nations
(c) be exploited economically or made use of with the aim of safeguarding the interests of mankind
(d) be conserved exclusively for peaceful purposes in perpetuity.]

Mr. Peart: I was kind in the sense that I accept that the subject is of great importance. I cannot find time during the sitting days of next week, but I note what my hon. Friend has said.

Mr. Montgomery: In view of the great alarm felt by local education authorities about the vicious cuts imposed on school building by the Government, does the Leader of the House think that we could have a debate on this subject in the near future?

Mr. Peart: I do not think that there have been any vicious cuts—[HON. MEMBERS: "Oh."] I do not think so. I know that the hon. Gentleman is a strong defender of education, but it is not for me to get involved in this matter; and not next week.

Dr. David Kerr: Will my right hon. Friend accept that his helpful answer to my hon. Friend the Member for Hampstead (Mr. Whitaker) will add to


the alarm of those who are anxious to see further progress on and completion of the Divorce Reform Bill and the Sunday Entertainments Bill? Could he not be more specific as, if these Measures are to complete all their parliamentary procedures, we shall need to have them brought to the House within the next week or so?

Mr. Peart: My hon. Friend must appreciate that there are many urgent matters. I will look at this question.

Sir Harmar Nicholls: Will the Leader of the House think again about taking the British Steel Corporation Motion on the Friday, particularly as the second item of business? It is quite likely that the Motion relating to the Supplementary Benefit (Determination of Requirements) Regulations, which is down as first business, will take the full morning. Rather than have to give way later, will not the right hon. Gentleman be gracious, and take the borrowing powers Motion on any other day than Friday, particularly having in mind the £100 million involved?

Mr. Peart: It is a lot of money, but this sort of thing has happened before on a Friday. I really cannot repeat all that I said to the Leader of the Liberal Party, but I note what the hon. Gentleman says.

Mr. Hector Hughes: Will my right hon. Friend find time, at long last, for my Motion No. 232, which will give the House an opportunity to pay tribute to three gallant gentlemen: not only Sir Francis Chichester, not only Mr. Alec Rose, but also Tim Durant, who, when his horse fell at Becher's Brook, remounted, and finished the Grand National?

Mr. Speaker: Order. We cannot have a speech now.
[That this House expresses its admiration for the robust virility and stamina not only of Sir Francis Chichester for his epic single-handed sail around the world, but for the more recent feats of two others, namely, Mr. Tim Durant, who on Saturday, 30th March, rode in the Grand National Steeplechase and, when he and his horse fell at Becher's Brook, remounted and finished the race; and to

Mr. Alec Rose who, in course of sailing single-handed round the world in the 37 foot ketch"Lively Lady", has just now, successfully and bravely weathered and braved the traditionally terrific storms and heavy seas of Cape Horn; and the House sends him greetings and best wishes of a safe return home from his equally epic voyage.]

Mr. Peart: I cannot find time next week. I would only say that there is on the Order Paper a Motion referring to Alec Rose, which I am sure we all heartily support.

Mr. G. Campbell: Will there be a statement next week, or, at any rate, before the Summer Recess, on the whole question of the siting of the proposed smelters in development areas?

Mr. Peart: I know that this is a very urgent matter. I recognise the problem. I will convey the hon. Member's views to my right hon. Friend.

Mr. Stodart: Further to the question asked by my right hon. Friend the Member for Grantham (Mr. Godber) about a statement on the fishing industry next week, can the Leader of the House say whether, before the Summer Recess, we shall get the debate on the industry to which we are accustomed at this time of the year?

Mr. Peart: Yes, Sir. I am hoping to have that debate. There is an affirmative Order concerned with the white fish industry, and the debate might be on that.

Mr. Bruce-Gardyne: The right hon. Gentleman will be aware that the Government are proposing important changes in the system of protection for the jute industry in East Scotland. Will he ask his right hon. Friend the President of the Board of Trade to be sure to make a statement on this matter before the House rises for the Summer Recess?

Mr. Peart: I will convey the hon. Gentleman's views. He has the opportunity to put down Questions, but I note what he says.

Mr. Fletcher-Cooke: Does the right hon. Gentleman recall that when his right hon. Friend the First Secretary introduced the Donovan Report she was very sympathetic to the idea of a debate be fore the Government announced their


intentions? Will he, therefore, reconsider the firm negative answer on that subject which he has just given?

Mr. Peart: We all appreciate that Donovan is very important, and that it must, therefore, be studied very carefully before we rush into it. I believe that we should have adequate debate, but I am not committing myself in any way to a debate before the end of the Session.

Mr. Eldward M. Taylor: Is the Leader of the House aware that chaotic conditions exist in some parts of West Scotland, where we have a bus strike on top of the rail "go slow", and hundreds of people unable to get to work? Will the right hon. Gentleman urge the Secretary of State or the Minister of Transport to make a statement next week on means that can be brought in to alleviate the situation?

Mr. Peart: The hon. Gentleman has an opportunity to question my right hon. Friend. I will convey his views to the Minister.

BUSINESS OF THE HOUSE (FINANCE BILL)

Ordered,

That the Third Reading of the Finance Bill may be taken immediately after the consideration of the Bill, notwithstanding the practice of this House as to the interval between the stages of such a Bill.—[Mr. McCann.]

Orders of the Day — FINANCE BILL

As amended (in the Standing Committee), further considered.

[4TH ALLOTTED DAY]

Clause 16

LIFE POLICIES, LIFE ANNUITY CONTRACTS, AND CAPITAL REDEMPTION POLICIES

Mr. Speaker: I have posted up what is the final list of selected Amendments for the Report stage. I should like to say how much I appreciate the help given by all who have assisted me these last three days in what has been a considerable task.

3.56 p.m.

The Chief Secretary to the Treasury (Mr. John Diamond): I beg to move Amendment No. 188, in page 12, leave out lines 24 to 29 and insert:
(ii) subsection (3)(e) of that section (exemption for interest etc. not exceeding £100 in the case of other premiums each of which is one of a series of equal premiums payable at equal intervals of not more than one year) shall have effect without the exclusion of premiums falling within the said subsection (3)(d), and, in the case of premiums payable under a qualifying policy within the meaning of Part I of the said Schedule 9, with the omission of the words from' each of which' to' one year'.
This is the first of a series of Amendments which are broadly relieving, and relate to technical tax matters which have been mostly, but not entirely, discussed with the interests concerned. I imagine, therefore, that it might be the wish of the House that I should deal with this Amendment and the other related Amendments to the Clause and to Schedule 9 very shortly indeed. I am, of course, at the disposal of the House as regards any questions that hon. Members may desire to ask and which I have not covered in an opening statement.
I therefore merely say of this Amendment that it relaxes the conditions on which interest of up to £100 may be allowed as a deduction for Surtax, and provides that in the case of a qualifying policy any premiums come within the relief.

Mr. Patrick Jenkin: This is the first of no fewer than 55 Amendments to Clause 16 and to Schedule 9 which the Government have tabled. We very much welcome the fact that the Government have moved so far to meeting not only the views that were put from this side in Committee, but the views that were put very forcibly and very ably indeed by the outside interests concerned.
I very much welcome what the right hon. Gentleman has said about his intention to move all these Amendments extremely briefly. For my part, and I speak only for myself in this, I should have no objection to their being moved in groups, and moved formally, and any hon. Member could then ask questions—

Mr. Speaker: Order. Technically, the Amendments cannot be moved in groups. They can be considered in groups.

Mr. Jenkin: I appreciate that, Mr. Speaker, and I am grateful to be corrected. I should have suggested that they should be considered in groups, and that any hon. Member can then ask questions. These are highly technical matters and, as the right hon. Gentleman has pointed out, they have for the most part been very fully discussed with interests outside. I therefore do not think that we would be failing in the duty resting on Parliament in passing legislation like this if we were not to discuss it as fully as might be appropriate in other circumstances.
May I also express, on this Amendment and the proposed Amendments, great satisfaction that the Treasury went as far as it did in engaging in very full consultations with interests outside, particularly the Life Offices Association. The Treasury has done this since the Committee stage, and I am perfectly certain that it has been to the advantage of the whole insuring public and to the whole economy.
4.0 p.m.
When this suggestion of consultation was mentioned in Committee by a number of hon. Members, the hon. Member for Salford, West (Mr. Orme) appeared to take objection to it. He said:
What his hon. Friends are saying in effect is' Let the vested interests write the policy.' That is what he is saying."—[OFFICIAL REPORT,

Standing Committee A, 22nd May, 1968; c. 1317.]
All I can say, and I place it firmly on record, is that I entirely support and fully endorse the Treasury's action in this regard. The Bill will be the better for it. I hope that the precedent will be followed when dealing with technical legislation of this sort that full consultations can be entered into—of course, in strict confidence—even before the Budget statement, so that we are not once again faced with a Clause and a Schedule which have to be amended at this stage with 55 separate Government Amendments.

Amendment agreed to.

Further Amendment made: No. 189, in page 12, line 29, at end insert—
(1A) The supplementary provisions contained in Part III of the said Schedule 9 shall also have effect.—[Mr. Diamond.]

Amendment proposed: No. 190, in page 12, line 31, leave out from'insurance' to' then' in line 33 and insert:
'having as its sole object the provision on an individual's death or disability of a sum substantially the same as any amount'.—[Mr. Diamond.]

Mr. Speaker: I suggest that we take at the same time the Amendment to the proposed Amendment by the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin), to leave out'sole' and insert' main'.

Mr. Patrick Jenkin: Perhaps it would be appropriate if I were to say a word or two about my Amendment. Briefly, subsection (2) is intended to exempt from the requirements of a qualifying policy insurance policies which are taken out to protect mortgages—so-called mortgage protection policies—and it is quite right that it should. Clearly, these are separate animals, and all the restrictions in Schedule 9 should not apply to them.
When the Bill was first discussed, however, it was apparent that the Clause was extremely narrowly drawn. We drew attention to this in Committee and, in particular, to the words
to any policy of life assurance the only benefit secured by which is the payment".
We emphasised the word "only" and we moved an Amendment to suggest that the right word should be "may" on the ground that if it were strictly construed,


a policy containing any collateral benefits of any sort might fail to qualify for the exemption.
The Financial Secretary took the point and agreed to consider it. We now have Amendment No. 190, but it does not seem to me that the Chancellor has succeeded in meeting the point which we made. He has removed "benefit" and substituted "object". He is also taking account of the circumstances that it may not be exactly the same sum which is payable by the policy which may be necessary to meet the mortgage debt. Presumably, the argument rests on the proposition that the word "object" in Amendment 190 is to be construed as equivalent to "purpose" and that it would, therefore, be distinguishable from any subordinate advantages which would be benefits and that, therefore, there is a distinction to be drawn between "benefits" and "object".
Amendment No. 190 uses the words
having as its sole object the provision on an individual's death".
The Government would, no doubt, argue that they have taken the point and that if there are any supplementary collateral benefits, they will not disqualify the policy from the exemption. One must, however, remember that the court will come afresh to this matter, It will not have had the advantage of reading the arguments which we have had in Committee and on the Floor of the House. It will not have realised that "object" has been substituted for "benefits". The court will look at the policy as a whole. It will see that the object is to provide a sum and to provide a number of other benefits. It will look at the Section, which will say that the sole object is
the provision … of a sum
and it will say that because the other benefits are provided, the policy will be excluded.
I cannot believe that it is the Government's intention that it should be the sole purpose of a policy to provide the capital sum and that if any collateral benefits are included, that will disqualify it. I do not believe that the Government have remedied the defect the force of which they recognised when we raised the matter in Committee. I therefore

suggest that my Amendment to leave out "sole" and to insert "main" is necessary to achieve the Government's intention.

Mr. Diamond: I suggest that essentially we have met the reasonable view of the interests concerned and the reasonable arguments put forward by the Opposition, but not precisely in the way that the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) has interpreted it. The situation is, as the hon. Member says, that to be excluded completely from the effect of the legislation, the objects must be narrowly defined as he has indicated; and as he has said, the court would come fresh to an interpretation. That, however, is so that the policies in question should be completely excluded from the provisions.
If further elements are brought into the policy as a result of which it would not be excluded from the provisions, we then get the situation that the provisions apply. There is nothing wrong with that, however, because if the policy is still a qualifying policy, there is no difficulty. There is, therefore, no reason to remove these policies wholly from the provisions of the Bill to achieve what the hon. Member wants to achieve and what I am glad to co-operate in giving him. In these circumstances, I think that the hon. Member would not wish to press his Amendment.

Mr. Patrick Jenkin: No doubt the interests concerned—who, incidentally, did not raise this matter with me; this is a view which I have taken myself on the construction—will read what the Chief Secretary has said and will be able to refer to it as necessary when advising their members.
Perhaps the right hon. Gentleman will be prepared to consider how the Clause operates in the year ahead and if it appears that an Amendment is necessary to give reasonable flexibility—

Mr. Diamond: Mr. Diamond indicated assent.

Mr. Jenkin: —I am glad to see the right hon. Gentleman nodding consent—he will be prepared to bring in an Amendment.

Mr. Speaker: Order. We are not in Committee, and on Report it is unusual for an hon. Member to speak twice unless


he is the mover of an Amendment or the Minister in charge.

Amendment agreed to.

Further Amendment made: No. 191, in page 12, line 37, leave out' annual instalments' and insert:
'instalments payable annually or at shorter regular intervals'.—[Mr. Diamond.]

Mr. Diamond: I beg to move Amendment No. 10 in page 13, line 20, at end add—
(5) A policy of life insurance issued in respect of an insurance made on or before 19th March 1968 shall be treated for the purposes of subsection (4) above and the said Schedule 9 as issued in respect of one made after that date if it is varied after that date so as to increase the benefits secured, or to extend the term of the insurance:
Provided that a variation effected before the end of the year 1968 shall be disregarded for the purposes of this subsection if its only effect is to bring into conformity with paragraph 2 of that Schedule (qualifying conditions for endowment policies) a policy previously conforming therewith except as respects the amount guaranteed on death, and no increase is made in the premiums payable under the policy.
This Amendment is essentially an anti-avoidance proposal, the object being to stop people using pre-Budget policies as a vehicle for avoidance. The position is that if a pre-Budget policy conformed with the tests in Schedule 9, any variation must conform with the new rules if it is to continue to qualify for tax reliefs.
The general effect of the Amendment is that if anybody has a pre-Budget policy which does not satisfy the conditions, he may keep it as it stands and the new legislation will not catch it, provided that he does not vary it—because the Clause applies to policies entered into after Budget day. If, however, he varies the policy to increase the benefits or extend the term of the insurance, he will become exposed to the new legislation.
Therefore, the proviso to the Amendment allows certain pre-Budget policies to be rectified by the end of 1968. They will then be qualifying policies for all purposes. This provision was asked for by the unit trust movement, whose pre-Budget policies have failed to conform with the 75 per cent. guarantee test on a formality.

Amendment agreed to.

Orders of the Day — Schedule 9

LIFE POLICIES, LIFE ANNUITY CONTRACTS AND CAPITAL REDEMPTION POLICIES

Mr. Diamond: I beg to move Amendment No. 192, in page 63, line 26, leave out from beginning to 'or' in line 37, and insert:

(1) Subject to the following provisions of this Part of this Schedule, if a policy secures a capital sum which is payable only on death, or one payable either on death or on earlier disability, it is a qualifying policy if—

(a) it satisfies the conditions appropriate to it under sub-paragraphs (2) to (4) below, and
(b) except to the extent permitted by sub-paragraph (5) below, it does not secure any other benefits.

(2) If the capital sum referred to in sub-paragraph (1) above is payable whenever the event in question happens, or if it happens at any time during the life of a specified person—

(a) the premiums under the policy must be payable at yearly or shorter intervals, and either—

(i) until the happening of the event, or, as the case may require, until the happening of the event or the earlier death of the specified person, or
(ii) until the time referred to in sub-paragraph (i) above.



Perhaps it would be convenient to take with it Government Amendments Nos. 193 to 196 inclusive and Government Amendments No. 198 and No. 199.

Mr. Speaker: If the House approves, so be it.

Mr. Diamond: I am grateful, Mr. Speaker.
As Amendment No. 192 is the first to Schedule 9, perhaps I may now reply to what the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) said about the number of Amendments. He was right to say that there are a large number to the Schedule. There are 50 altogether, but they are very largely repetitions and consequential Amendments to provide the same words in a number of different places.
Because I was also interested in the same point, I obtained an analysis in which the hon. Gentleman may be interested. There are 23 substantive Amendments, which is still a substantial number, 10 Amendments meet requests in Committee, and five meet direct


requests by the life offices. Seven rectify defective drafting and one consists of a machinery provision which has been agreed with the Life Offices' Association and the Industrial Life Offices' Association.
I now turn to the group of Amendments, one of which is starred. It differs from its predecessor, an unstarred Amendment with the same number, in having the words "the policy" added at the end. They are added purely for drafting purposes, so that the English flows.
The effect of the group of Amendments is twofold. First, they allow policies to qualify if the capital sum secured is payable on disability as an alternative to death or maturity, and, second, they deal more adequately with joint and contingency assurances.

4.15 p.m.

Mr. Patrick Jenkin: Amendment No. 194 includes the word "until" in sub-paragraph (i), which begins
until the happening of the event or the earlier expiry of the said term, …
If the use of that word means that the premiums under a policy must be payable until the happening of the event but not thereafter, there seems to be a possible conflict between the sub-paragraph and other parts of the Bill. For example, if one has a mortgage protection policy for £1,000 which also involves a small residual benefit of, say, £200—that is, a constant endowment assurance benefit, one has left a sum assured of £800 dropping eventually to zero.
For this, a level annual premium is paid throughout the term of the policy, but the decreasing sum reaches zero before the last premium is payable, so that there are still two premiums payable referable to the declining sum after it has reached zero. It could be said that the policy would be disqualified because the use of the phrase "until the happening" implied that if there are no premiums payable thereafter a policy does not come within the Clause.
It may well be that "until" here is to be interpreted as "at least until", and that it is quite irrelevant that, provided the premiums are payable at least until

the happening of the event, any further premiums may be payable, thereafter.
That is a possible interpretation, but the alternative that I have suggested is also possible, and we owe it to those concerned to make sure that there shall be no doubt about this. I very much hope that the Chief Secretary will be able to reassure us, or, if necessary, introduce a retrospective Amendment next year.

Mr. Diamond: I can reassure the hon. Gentleman. His point is valid, and it has been considered. I can confirm that the Amendment literally means only "at least until".

Amendment agreed to.

Further Amendments made: No. 193, in page 64, line 2, leave out from' the' to' the' in line 5 and insert:
'policy were to continue in force for a period of ten years from the making of the insurance, or, in a case falling within paragraph (a)(ii) above, until'.

No. 194, in line 7, leave out from' the' to' ending' in line 15 and insert:
'capital sum referred to in sub-paragraph (1) above is payable only if the event in question happens before the expiry of a specified term ending more than ten years after the making of the insurance, or only if it happens both before the expiry of such a term and during the life of a specified person—
(a) the premiums under the policy must be payable at yearly or shorter intervals, and either—

(i) until the happening of the event or the earlier expiry of the said term, or, as the case may require, until the happening of the event or, if earlier, the expiry of the term or the death of the specified person, or
(ii) as in sub-paragraph (i) above, but with the substitution for references to the term of references to a specified shorter period, being one'.

No. 195, in line 24, leave out from' the' to third' the' in line 26, and insert:
'policy were to continue in force for the term referred to in paragraph (a)(i) above or, as the case may require, for'.

No. 196, in line 28, leave out from' the' to' must' in line 30 and insert:
'capital sum referred to in sub-paragraph (1) above is payable only if the event in question happens before the expiry of a specified term ending not more than ten years after the making of the insurance, or only if it happens both before the expiry of such a term and during the life of a specified person, the policy'—[Mr. Diamond.]

Mr. Diamond: I beg to move Amendment No. 197, in page 64, line 32, at end insert:
(5) Notwithstanding sub-paragraph (1)(b) above, if a policy secures a capital sum payable only on death, it may also secure benefits (including benefits of a capital nature) to be provided in the event of a person's disability; and no policy is to be regarded for the purposes of that provision as securing other benefits by reason only of the fact that it confers a right to participate in profits, that it carries a guaranteed surrender value, that it gives an option to receive payments by way of annuity, or that it makes provision for the waiver of premiums by reason of a person's disability, or for the effecing of a further insurance or insurances without the production of evidence of insurability.
(6) In applying sub-paragraph (2) or (3) above to any policy—

(a) no account shall be taken of any provision for the waiver of premiums by reason of a person's disability, and
(b) if the term of the policy runs from a date earlier, but not more than three months earlier, than the making of the insurance, the insurance shall be treated as having been made on that date, and any premium paid in respect of the period before the making of the insurance, or in respect of that period and a subsequent period, as having been payable on that date.

(7) References in this paragraph to a capital sum payable on any event include references to any capital sum, or series of capital sums, payable by reason thereof; and a policy secures a capital sum payable either on death or on disability notwithstanding that the amount payable may vary with the event.
The Amendment sets out to achieve four purposes. First, it states explicitly that a whole life policy may offer the "normal incidents of a policy". Second, it allows waiver of premiums on disability. Third, it allows back-dating of policies for up to three months. Fourth, it states explicitly that a capital sum payable on death includes a capital sum payable at a later date or a series of capital sums, and that the amount payable on death, disability or maturity need not be the same figure in all events.

Mr. Speaker: Order. The hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) may, if he wishes, talk about his earlier Amendment, No. 29, in line 8, after' term', insert:
'or a series of capital sums payable on or after death and until the expiry of a specified term such specified term'.

Mr. Patrick Jenkin: The point of the Amendment has been covered in the Government Amendment, Mr. Speaker.
Does the figure of 23 substantive Amendments which the Chief Secretary gave us earlier include the four substantive Amendments he has just said were contained in the Amendment? It is not a point of great importance, but there are certainly a great many Amendments on the Notice Paper.

Mr. Diamond: I shall look into that. It may well be that in that sense the figure is greater, but I shall check, as I do not wish to mislead the hon. Gentleman.

Amendment agreed to.

Further Amendments made: No. 198, in page 64, line 34, leave out from beginning to' is' in line 37 and insert:
(1) Subject to the following provisions of this Part of this Schedule, a policy which secures a capital sum payable either on survival for a specified term or on earlier death, or earlier death or disability, including a policy securing the sum on death only if occurring after the attainment of a specified age not exceeding sixteen.

No. 199, in line 42, leave out from' and' to end of line 45 and insert:

(i) until the happening of the event in question, or
(ii) until the happening of that event, or the earlier expiry of a specified period shorter than the term but also ending not earlier than ten years after the making of the insurance, or
(iii) if the policy is to lapse on the death of a specified person, until one of those times or the policy's earlier lapse.—[Mr. Diamond.]

Mr. Diamond: I beg to move Amendment No. 200, in page 65, line 5, leave out from' guarantee' to' equal' in line 7 and insert:
'that the capital sum payable on death, or on death occurring after the attainment of a specified age not exceeding sixteen, will, whenever that event may happen, be'.
The Amendment makes it clear that the minimum 75 per cent. death benefit must be guaranteed throughout the term of a policy.

Amendment agreed to.

Mr. Diamond: I beg to move Amendment No. 237, in line 14, leave out' sixteen years of age' and insert:
'a specified age not exceeding sixteen'.
The Amendment slightly extends the special provision for industrial assurance children's policies.

Amendment agreed to.

Mr. Diamond: I beg to move Amendment No 201, in page 65, line 16, at end insert:
'and
(e) the policy must not secure the provision (except by surrender) at any time before the happening of the event in question of any benefit of a capital nature other than a payment falling within paragraph (d)(ii) above, or benefits attributable to a right to participate in profits or arising by reason of a person's disability.
(2) Sub-paragraphs (6) and (7) of paragraph 1 above shall, with any necessary modifications, have effect for the purposes of this paragraph as they have effect for the purposes of that paragraph.
(3) For the purposes of sub-paragraph (l)(d)(i) above, ten per cent. of the premiums payable under any policy issued in the course of an industrial insurance business as defined in section 1(2) of the Industrial Assurance Act 1923 shall be treated as attributable to the fact that they are not paid annually'.
The Amendment has two purposes. First, it states that an endowment assurance policy may not provide payments of capital during its term except through surrender or bonuses, or, indeed, on the return of premiums in the case of an industrial assurance children's policy. Secondly, it provides that 10 per cent. of the premiums payable under industrial assurance policies should be disregarded in deciding whether death benefit is at least three-quarters of the total premiums.

Amendment agreed to.

Mr. Iain Macleod: On a point of order. To expedite matters, may I say that, as the Chief Secretary pointed out, we are entirely content with many of the Amendments. They are largely to meet points which we made in Committee, and there are no observations which we wish to make until we reach Amendment No. 293. I wonder whether it would be possible to put the Amendments en bloc. We should be content with that if it could be done.

Mr. Speaker: I am most grateful to the right hon. Gentleman.

Further Amendments made: No. 285, in page 65, line 30, leave out from' guaranteed' to end of line 33 and insert:
'at the time the assurance is made by all other policies issued in the course of such a business to the same person and not constituting qualifying policies apart from this paragraph, do not exceed £1,000'.

No. 203, in page 65, line 36, leave out from' except' to' payable' and insert:
'by reason of death or surrender, no capital sum other than one falling within paragraph (d) below can become'.

No. 286, in page 65, line 40, after' term' insert'(i)'.

No. 287, in page 65, line 42, after' others', insert' except the final payment'.

No. 288, in page 65, line 43, after' and' insert' (ii)'.

No. 289, in page 65, line 45, at end add:
'and
(iii) if the first such payment is due earlier than ten years after the making of the assurance, or any other such payment except the last is due earlier than ten years after the preceding one, the sums guaranteed by the policy, together with the other sums referred to in paragraph (a) above so far as guaranteed by policies the payments under which also fall within this sub-paragraph, do not exceed £500.
(2) For the purpose of this paragraph, the sums guaranteed by a policy do not include any bonuses, or, in the case of a policy providing for a series of payments during its term, any of those payments except the first, or any sums payable on death during the term by reference to one or more of those payments except so far as that sum is referable to the first such payment'.

No. 205, in page 66, leave out lines 1 to 11 and insert:

(iii) Family income policies and mortgage protection policies

5.—(1) The following provisions apply to any policy which is not a qualifying policy apart from those provisions, and the benefits secured by which consist of or include the payment on or after a person's death of—

(a) one capital sum of an amount which does not vary according to the date of death, plus a series of capital sums payable if the death occurs during a specified period, or
(b) a capital sum, the amount of which is less if the death occurs in a later part of specified period than if it occurs in an earlier part of that period.

(2) A policy falling within sub-paragraph (l)(a) above is a qualifying policy if—

(a) it would be one if it did not secure the series of capital sums there referred to, and the premiums payable under the policy were such as would be chargeable if that were in fact the case, and
(b) it would also be one if it secured only that series of sums, and the premiums thereunder were the balance of those actually so payable.

(3) A policy falling within sub-paragraph (1) (b) above is a qualifying policy if—

(a) it would be one if the amount of the capital sum there referred to were equal throughout the period to its smallest amount, and the premiums payable under the policy were such as would be chargeable if that were in fact the case, and
(b) it would also be one if it secured only that capital sum so far as it from time to time exceeds its smallest amount, and the premiums payable the reunder were the balance of those actually so payable.

No. 206, in page 66, line 35, leave out' is so discharged, that premium' and insert:
'or of any part of that premium, is so discharged, the premium or part'.

No. 207, in page 66, line 40, leave out from' company' to end of line 4 on page 67 and insert:
' with whom the insurance is made of the whole or a part of any sum which has become payable on the maturity of, or on the surrender more than ten years after its issue of the rights conferred by, a policy—

(a) previously issued by the company to the person making the insurance, or, if it is made by trustees, to them or any predecessors in office, or
(b) issued by the company when the person making the insurance was an infant, and securing a capital sum payable either on a specified date falling not more than one month after his attaining twenty-five or on the anniversary of the policy immediately following his attainment of that age,

being, unless it is a policy falling within paragraph (b) above and the premium in question is a first premium only, a policy which was itself a qualifying policy, or which would have been a qualifying policy if issued in respect of an insurance made after 19th March, 1968.

No. 208, in page 67, line 9, after' policy', insert:
'the question whether the new policy is a qualifying policy shall, to the extent provided by the rules in sub-paragraph (2) below, be determined by reference to both policies.
(2) The said rules (for the purposes of which, the question whether the old policy was a qualifying policy shall be determined in accordance with this Part of this Schedule, whatever the date of the insurance in respect of which it was issued) are as follows—'.

No. 209, in page 67, line 11, leave out from' not' to end of line 18 and insert:
'the new policy is not a qualifying policy unless the person making the insurance in respect of which it is issued was an infant when the old policy was issued, and the old policy was one securing a capital sum payable either on a specified date falling not later than one month after his attaining twenty-five or on the anniversary of the policy immediately following his attainment of that age;'.

No. 210, in page 67, leave out lines 21 to 27 and insert:
' the new policy is a qualifying policy unless—

(i) it takes effect before the expiry of ten years from the making of the insurance in respect of which the old policy was issued, and
(ii) the highest total of premiums payable thereunder for any period of twelve months expiring before that time is less than one-half of the highest total paid for any period of twelve months under the old policy, or under any related policy issued less than ten years before the issue of the new policy ("related policy" meaning any policy in relation to which the old policy was a new policy within the meaning of this paragraph, any policy in relation to which that policy was such a policy, and so on);'.

No. 211, in page 67, line 29, leave out from first' policy' to end of line 41 and insert:
'and would fail to be so by reason only of paragraph 1(2) or 1(3) above, or of sub-paragraph (a), (b) or (c) of paragraph 2, it is nevertheless a qualifying policy if the old policy was a qualifying policy and—

(i) the old policy was issued in respect of an insurance made more than ten years before the taking effect of the new policy, and the premiums payable for any period of twelve months under the new policy do not exceed the smallest total paid for any such period under the old policy, or
(ii) the old policy was issued outside the United Kingdom, and the circumstances are as specified in sub-paragraph (3) below.

(3) The said circumstances are—

(a) that the person in respect of whom the new insurance is made became resident in the United Kingdom during the twelve months ending with the date of its issue,
(b) that the issuing company certify that the new policy is in substitution for the old, and that the old was issued either by a branch or agency of theirs outside the United Kingdom or by a company outside the United Kingdom with whom they have arrangements for the issue of policies in substitution for ones held by persons coming to the United Kingdom, and
(c) that the new policy confers on the holder benefits which are substantially equivalent to those which he would have enjoyed if the old policy had continued in force'.

No. 212, in page 67, leave out lines 42 to 49 and insert:
9A.—(1) Subject to the provisions of this paragraph, where the terms of a policy are varied, the question whether the policy after the variation is a qualifying policy shall be determined in accordance with the rules in paragraph 9 above, with references in those rules to the new policy and the old policy construed for that purpose as references respectively to the policy after the variation


and the policy before the variation, and with any other necessary modifications.
(2) In applying any of those rules by virtue of this paragraph, the question whether a policy after a variation would be a qualifying policy apart from the rule shall be determined as if any reference in paragraphs 1 to 7 of this Schedule to the making of an insurance, or to a policy's term, were a reference to the taking effect of the variation or, as the case may be, to the term of the policy as from the variation.
(3) This paragraph does not apply by reason of—

(a) any variation which, whether or not of a purely formal character, does not affect the terms of a policy in any significant respect, or
(b) any variation effected before the end of the year 1968 for the sole purpose of converting into a qualifying policy any policy issued (but not one treated by virtue of section 16(5) of this Act as issued) in respect of an insurance made after 19th March 1968.

No. 213, in page 68, leave out line 11 and insert:
(i) any death giving rise to benefits under the policy.

No. 214, in page 68, line 16, leave out' interest' and insert' share'.

No. 215, in page 68, line 18, leave out from' the' to end of line 27 and insert:
'above events, but—

(i) in the case of death or maturity, only if the policy is converted into a paid-up policy before the expiry of ten years from the making of the insurance, or, if sooner, of three-quarters of the term for which the policy is to run if not ended by death or disability,
(ii) in the case of a surrender or assignment, only if it is effected within that time, or the policy has been converted into a paid-up policy within that time'.

No. 216, in page 68, line 34, leave out from' unless' to end of line 37 and insert:
' the person making the insurance in respect of which the new policy is issued was an infant when the former policy was issued, and the former policy was one securing a capital sum payable either on a specified date falling not later than one month after his attaining twenty-five or on the anniversary of the policy immediately following his attainment of that age'.

No. 217, in page 68, leave out lines 41 and 42 and insert:
(5) No account shall be taken for the purposes of this paragraph of any assignment effected by way of security for a debt, or on the discharge of a debt secured by the rights or share concerned, or of any assignment between spouses living together; and references

in sub-paragraph (1) above to the surrender of the rights conferred by a policy do not include references to the surrender of any right to a bonus.

No. 218, in page 69, line 4, leave out from' is' to fourth' the' and insert' a death'.

No. 219, in page 69, line 7, leave out' bonuses' and insert' capital payments'.

No. 220, in page 69, line 13, leave out' bonuses' and insert' capital payments'.

No. 221, in page 69, line 21, leave out from' is' to' as' in line 27 and insert:
' an assignment—

(i) if it is an assignment of all the rights conferred by the policy, the excess (if any) of the amount or value of the consideration, plus the amount or value of any relevant capital payments, over the total amount previously paid under the policy by way of premiums, and
(ii) if it is an assignment of a share only in those rights, the excess (if any) of the amount or value of the consideration, plus the amount or value of any relevant capital payments so far as attributable to the share assigned and received by the assignor or by any person at his direction, over the same proportion of the total amount previously paid under the policy by way of premiums'.

No. 222, in page 69, line 39, leave out' interest' and insert' share'.

No. 223, in page 69, line 40, leave out from' In' to end of line 48 and insert:
'this paragraph, "relevant capital payments" means, in relation to any policy, any sum or other benefit of a capital nature, other than one attributable to a person's disability, paid or conferred under the policy before the happening of the chargeable event, and any sum paid, or other benefit conferred, by reason of any surrender before that time of a right to a bonus under the policy; and references in this sub-paragraph and (in relation to premiums) in sub-paragraph (1) above to "the policy" include references to any related policy, that is to say, to any policy in relation to which the policy is a new policy within the meaning of paragraph 9 above, any policy in relation to which that policy is such a policy, and so on'.

No. 224, in page 70, line 3, leave out' interest' and insert 'share'.

No. 225, in page 70, line 3, at end insert:
Where the terms of a contract provide for the payment of a capital sum as an alternative, in whole or in part, to payments by way of annuity, the taking of the capital sum shall be treated for the purposes of this and the next following paragraph as a surrender in whole or in part of the rights conferred by the contract.

No. 226, in page 70, leave out lines 8 and 9 and insert:
(3) Sub-paragraph (5) of paragraph 10 above shall, with any necessary modification, apply for the purposes of this paragraph as it applies for the purposes of the said paragraph 10.

No. 227, in page 70, line 29, leave out' interest' and insert' share'.

No. 240, in page 70, line 34, leave out' an interest' and insert' a share'.

No. 228, in page 70, line 49, leave out' interest' and insert' share'.

No. 229, in page 71, leave out lines 1 and 2 and insert:
(2) Sub-paragraph (5) of paragraph 10 above shall apply for the purposes of this paragraph as it applies for purposes of the said paragraph 10.

No. 230, in page 71, line 20, leave out from first' the' to end of line 23 and insert:
'rights conferred by the policy or contract were vested in an individual as beneficial owner, or were held on trusts created by an individual (including trusts arising under section 11 of the Married Women's Property Act 1882, section 2 of the Married Women's Policies of Assurance (Scotland) Act 1880, or section 4 of the Law Reform (Husband and Wife) Act (Northern Ireland) 1964) or as security for a debt owed by an individual'.

No. 231, in page 71, line 30, leave out from beginning to' by' in line 32 and insert:
'said rights were in the beneficial ownership of a close company within the meaning of Part IV of the Finance Act 1965, or were held on trusts created, or as security for a debt owed'. —[Mr. Diamond.]

Mr. Patrick Jenkin: I beg to move Amendment No. 293, in page 71, line 30, to leave out from the beginning to "be" in line 39 and insert:
said rights were in the beneficial ownership of a close company within the meaning of Part IV of the Finance Act 1965, or were held on trusts created, or as security for a debt owed by such a company, then the amount of the gain shall".
I should like to echo the gratitude of my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) for the speed with which you, Mr. Speaker, have been able to deal with the Amendments. It has saved us a lot of time and will help us in discussing parts of the Bill on which not a single word has been said during its passage.
The Amendment has not, I understand, been discussed with the interests concerned. I stand to be corrected, but I

believe that that is so. We raised this matter in Committee and we received what I regarded as a very unsatisfactory answer. That is why I felt it right that we should press it again. It is to do with the Surtax charge on the gains which arise on non-qualifying policies. The House will be aware that "gains", in this case, represent any excess of the policy moneys over the aggregate premiums which have been paid.
The justification for the Surtax charge is that the gains represent sums which, in the hands of the insurance company, have borne only Income Tax at a conventional rate and, where appropriate, Capital Gains Tax. Therefore, if the policy moneys reach the insurer free of further taxation, this will be, and has been in the past, a way for the avoidance of Surtax. In the case of an individual, the charge is only to Surtax, but in the case of a close company—and the Amendment is related to close companies —there is a most extraordinary provision which the Financial Secretary tried to explain in Committee, but failed entirely to do so satisfactorily, namely, that the gain is subject not only to Surtax but to a second charge—Income Tax. I say "a second charge", and I emphasise it, because the money has already borne Income Tax in the hands of the insurance company.

Mr. Diamond: May we be clear which money has already borne Income Tax in the hands of the company?

Mr. Jenkin: The money represented by the gain, which is the difference between the aggregate premium paid and the policy monies which become payable when the policy matures. That represents the accrual in the hands of the insurance company. Any interest which the premiums have earned have been subjected to Income Tax. Any capital gains from the premiums which have been invested have been subjected to Capital Gains Tax. That is why I say that this gain, in the hands of an individual or of a close company, should in fairness be subject only to Surtax and not to a second charge of Income Tax. Yet that is the effect of the Bill. My Amendment is intended to remove this anomaly.
The Financial Secretary sought to justify the anomaly by saying that it was


a sort of gamble. He used the phrase, "Heads they win, tails they lose", and the gamble depended on whether the company needed the income, remembering that this is a close company, for the purposes of its business—that is, whether the money would come within a short fall assessment. He argued that if the money was not assessed because it was needed in the business, it would not be taxed in the company's hands, to which I can only say, "I jolly well hope not". But if the money is assessed on the ground that it was not needed, it should be taxed as investment income.
The Financial Secretary used significant words in Committee which gave the impression that he still did not appreciate the nature of our case. He said:
…in the close company, have a certain advantage, for whereas a chargeable gain would be made on an individual, the same policy held by a close company would be entirely exempt from tax unless the close company, a trading company, could not show that it needed the money for the purpose of its business ".—[OFFICIAL REPORT, Standing Committee A, 22nd May, 1968; c. 1296.]
I emphasise that the hon. Gentleman said that the same policy held by a close company would be "entirely exempt from tax". That is not so. The money has borne tax in the hands of the insurance company and, for this reason, if the money became payable to an individual it would be subject only to Surtax. There seems to be no reason why, when it reaches the hands of a close company in circumstances in which it becomes a charge for tax, it should be charged not only to Surtax but to Income Tax.
In a close company, an individual cannot enjoy benefit if it is not distributed, and that is the disadvantage, if one needs to look for a disadvantage, of a policy inuring for the benefit of a close company. If the proprietors of the close company leave the policy money in the company, it does not swell their own spending power; they are forgoing the personal advantage, I agree that if it is distributed it would be entirely in conformity with the Schedule that it should be subject to the Surtax charge. But I cannot see why it should be charged to Income Tax, because the interest on the premium moneys has suffered Income Tax in the hands of the insurance company. I believe that if this Clause goes

through in the form in which it is at present it will do great injustice in these cases—there cannot be many of them, I concede that—where a non-qualifying policy will inure to the benefit of a close company.
4.30 p.m.
The Financial Secretary also went on to ask, and I suppose that he was entitled to ask, in what circumstances would a close company have the benefit of a non-qualifying policy. In a sense, he asked me to produce a case. I can retort, if there are no cases in which a close company would have the benefit of a non-qualifying policy, why include that provision in the Bill at all? I gather the Chief Secretary takes the point. He simply cannot refuse to remedy a potential injustice by claiming that it would never become an actual injustice, because there will be instances in which the paragraph would apply.
The paragraph is there, and if it is applied it will give rise to the injustice which I have described to the House, and it is Parliament's duty to prevent that injustice before it happens, and not after. It has never been the practice, when discussing potential tax anomalies, and before any fiscal injustice should be righted, that one should have, as it were, to produce a victim to display the gory wounds inflicted by the Treasury, so that the Treasury may see what is likely to be the damage done.
Suffice it to say, we have a family company; the founder takes out a single premium policy, held in trust by the company, perhaps on the grounds that, if the founder dies, there will be greater need of capital than otherwise would be the case, and to ensure that it is available to the business. Because it is a single premium non-qualifying policy it incurs the penalty of this tax, not only Surtax but also Income Tax twice. This is an appalling hazard for a company which has perfectly reasonably entered into such an arrangement. It is to treat a reasonable financial arrangement to a sort of fiscal Russian roulette, and it is Parliament's business to prevent that sort of thing from happening.
The Amendment by which we seek to prevent it would leave the potential charge to Surtax in cases where that would be appropriate—and I make no


complaint about that—but it would remove the double charge to Income Tax. I get the impression that the Chief Secretary has taken the point, and I hope that although this is the Report stage, and although the Amendment has been drafted with such skill as I can command, he will, nevertheless, feel it right to accept the Amendment. The damage we seek to prevent cannot happen often, but if it does happen great injustice will be done.

Sir Douglas Glover: I rise only to tell my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) that when he rose this afternoon I had not the faintest idea what this Amendment meant, but now I have got a glimmer of its meaning, and I am quite certain that he is right and that the Government ought to accept the Amendment.
There is a real case here for saying that the Conservative Party has reached the stage of preventive medicine whereas the Government are still acting as but chers, and, as my hon. Friend said, have to have a body with gory wounds before the Government can see that there is a patient to deal with. We say that this is a situation which can happen, that we have no need to wait till we can prove that it has happened, that it is absurd to leave this injustice in the Bill.
Our Amendment would remove it. I admit that there may be very few occasions when it would happen, but in certain circumstances it is bound to happen to a close company with this sort of policy, even though the occasions may be few. It may be rather like that mythical man, the bachelor with £100,000 a year and no dependants, the classic case which is argued across the Floor of the House on so many occasions. It may not exist, but it may, and if it does there is quite clearly an injustice which would be done to a close company, and I hope that the Chief Secretary will accept the Amendment.

Mr. Diamond: I believe I understand exactly the point raised by the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin). I apologise to the House that it has not been possible, in the circumstances in which I appear here instead of my hon. Friend, for me to read fully the wise and authoritative com-

ments which he made in Committee, but I have no hesitation in saying that what he said and what I shall be saying will be identical, because although truth is many-sided, there is only one truth, and the truth of this matter is, of course, that the hon. Gentleman is mistaken, and I hope that if he will be patient I can show him, and that is why I rose to ask him a question.
There is a broad measure of agreement between us at least on the acceptance of certain principles. The hon. Gentleman agrees that what is not at issue is Surtax-ability. The hon. Gentleman agrees that if a close corporation can satisfy the Revenue that it needs not for business purposes to distribute this standard figure it would not be distributed, and to that extent the element which is income would thereby be retained. There is in issue here whether there has been double taxation, be it by Income Tax or Corporation Tax, of certain income.
The hon. Gentleman recalls very well the discussions we had when Corporation Tax was introduced, and its effects on companies, and the distinction between the company and the shareholders. The hon. Gentleman recollects well that an individual holding investments direct is in a different position from an individual holding his investments through an investment company. I am talking of an investment trust at the moment. He recollects that an investment trust is not bound to pay, first, Corporation Tax—subject to certain exceptions which I will come to, because they are the nub of the argument—not required to pay Corporation Tax on its income. It then distributes part to the shareholder who is required to pay Income Tax, by means of withholding the tax, and, where relevant, Surtax. If the investment trust in question receives its income also taxed in such a way that it is accurately described as franked, then of course Corporation Tax is not levied again on that amount of income.
What the hon. Gentleman is, therefore, saying, and what he said specifically in reply to my question, when I asked, "What income?" is referring to the whole of the income which the life company receives and by means of which it is enabled to increase the value of the policy so that the question of gain arises;


and what the hon. Gentleman is, therefore, saying is that the whole of that income, which I define—I am sure we are at one in what we are talking about—as franked.
The hon. Gentleman is not accurate in that assumption, and I would not be in saying that none of it is franked, and if the argument has proceeded on the basis that it is entirely franked or entirely un-franked, both of those arguments are not wholly accurate. This is in fact a mixed bag. It is income both franked and un-franked, and the accretion to the policy is drawn from a mixed fund of income, and to the extent that there is an element of franked income within it the hon. Gentleman would be right in saying that this is unfortunate, but I cannot separate out, or provide any means of separating out, or even of apportioning, that element. I take his point.
I say that if there were an injustice I would be the first to want to remove it, but I cannot eliminate from that mixed fund such part, if any, which might be a small part, but which may nevertheless exist, as is already franked income which, in other circumstances, would not be subject, therefore, to Corporation Tax, which is, for this purpose, the same as Income Tax which, he says, is thereby being levied twice. I do not see how we can meet that point. It is a mixed fund, and the only way we can deal with the matter is as the Act provides. I therefore cannot accept the Amendment.

Mr. Patrick Jenkin: I am sure the Chief Secretary realises that that must have been a painful reply for him to make, since he was good enough to appreciate that, at any rate to an extent, which he did not attempt to quantify and neither will I, the injustice of which I complained is there.

The question of whether the income is franked or not—one could use a different language; if it has suffered tax or not— has been resolved in the case of the individual insurer in favour of the individual, in that no further Income Tax is charged on the gain that arises when policy moneys accrue, whereas with a close company it is decided in favour of the Revenue in that Income Tax is to be charged on the whole of it.

This is but one more example of the Government trying to have it both ways when dealing with close companies. They tell us, on the one hand, that close companies are no more than tax avoidance devices to allow private individuals to trade with the benefit of a corporate entity and that they should continue to be taxed as though they were individuals, but, at the same time, they always argue that close companies are subject to all the features of Corporation Tax and to all the conditions. The net result is that close companies, as we have said over and over again in the House and in Committee, are "clobbered" by the Revenue.

This may be a relatively unimportant example because it cannot happen very often, but it is a classic example of what happens if one chooses to conduct one's business affairs through a small family company. The Chief Secretary has given no assurance that he is prepared to meet the legitimate objection, an objection which he went a long way towards admitting had validity. In these circumstances I ask my hon. and right hon. Friends to express their displeasure in the Division Lobby.

Question put, That the Amendment be made:—

The House divided: Ayes 187, Noes 264.

Division No. 267.]
AYES
[4.42 p.m.


Alison, Michael (Barkston Ash)
Blaker, Peter
Campbell, Gordon (Moray &amp; Nairn)


Allason, James (Hemel Hempstead)
Boardman, Tom (Leicester, S.W.)
Carlisle, Mark


Astor, John
Bossom, Sir Clive
Channon, H. p. G.


Baker, W. H. K. (Banff)
Boyle, Rt. Hn. Sir Edward
Chichester-Clark, R.


Balniel, Lord
Braine, Bernard
Clegg, Walter


Beamish, Col. Sir Tufton
Brewis, John
Cooke, Robert


Bell, Ronald
Brinton, Sir Tatton
Cooper-Key, Sir Neill


Bennett, Sir Frederic (Torquay)
Bromley-Davenport,Lt.-Col.SirWalter
Costain, A. P.


Bennett, Or. Reginald (Cos. &amp; Fhm)
Bruce-Gardyne, J.
Craddock, Sir Beresford (Spelthorne)


Berry, Hn. Anthony
Bryan, Paul
Crouch, David


Bitten, John
Buchanan-Smith,Alick(Angus,N&amp;M)
Cunningham, Sir Knox


Biggs-Davison, John
Buck, Antony (Colchester)
Currie, G. B. H.


Birch, Rt. Hn. Nigel
Bullus, Sir Eric
Dalkeith, Earl of


Black, Sir Cyril
Burden, F. A.
Dance, James




Davidson,James(Aberdeenshire,W.)
Hunt, John
Percival, Ian


d'Avigdor-Coldsmid, Sir Henry
Iremonger, T. L.
Peyton, John


Deodes, Rt. Hn. W. F. (Ashford)
Jenkin, Patrick (Woodford)
Pike, Miss Mervyn


Dodds-Parker, Douglas
Johnson Smith, G. (E. Grinstead)
Pounder, Rafton


Donnelly, Desmond
Jopling, Michael
Powell, Rt. Hn. J. Enoch


Doughty, Charles
Joseph, Rt. Hn. Sir Keith
Price, David (Eastleigh)


Douglas-Home, Rt. Hn. Sir Alec
Kaberry, Sir Donald
Pym, Francis


Drayson, G. B.
Kimball, Marcus
Quennell, Miss J. M.


Elliot, Capt. Walter (Carshalton)
King, Evelyn (Dorset, S.)
Rees-Davies, W. R.


Elliott,R.W.(N'c'tle-upon-Tyne,N.)
Kirk, Peter
Rhys Williams, Sir Brandon


Emery, Peter
Kitson, Timothy
Ridsdale, Julian


Errlngton, Sir Eric
Knight, Mrs. Jill
Rodgers, Sir John (Sevenoaks)


Eyre, Reginald
Lambton, Viscount
Russell, Sir Ronald


Fisher, Nigel
Lancaster, Col. C. G.
Scott-Hopkins, James


Fletcher-Cooke, Charles
Langford-Holt, Sir John
Shaw, Michael (Sc'b'gh &amp; Whitby)


Fortescue, Tim
Legge-Bourke, Sir Harry
Silvester, Frederick


Foster, Sir John
Lewis, Kenneth (Rutland)
Smith, John (London &amp; W'minster)


Fraser,Rt.Hn.Hugh(St'fford &amp; Stone)
Lloyd, Ian (P'tsm'th, Langstone)
Speed, Keith


Galbraith, Hn. T. G.
Lloyd, Rt. Hn. Selwyn (Wirral)
Stodart, Anthony


Gilmour, Ian (Norfolk, C.)
Longden, Gilbert
Summers, Sir Spencer


Gilmour, Sir John (Fife, E.)
Loveys, W. H.
Tapsell, Peter


Glover, Sir Douglas
Lubbock, Eric
Taylor, sir Charles (Eastbourne)


Godber, Rt. Hn. J. B.
McAdden, Sir Stephen
Taylor.Edward M.(G'gow,Cathcart)


Goodhart, Philip
MacArthur, Ian
Taylor, Frank (Moss Side)


Coodhew, Victor
Mackenzie,Alasdair(Ross&amp;Crom'ty)
Teeling, Sir William


Gower, Raymond
Maclean, Sir Fitzroy
Thorpe, Rt. Hn. Jeremy


Grant, Anthony
Macleod, Rt. Hn. lain
Turton, Rt. Hn. R. H.


Grieve, Percy
McMaster, Stanley
Vaughan-Morgan, Rt. Hn. Sir John


Griffiths, Eldon (Bury St. Edmunds)
Maddan, Martin
Waddington, D.


Crimond, Rt. Hn. J.
Maginnis, John E.
Wainwright, Richard (Colne Valley)


Gurden, Harold
Marten, Neil
Walker, Peter (Worcester)


Hall, John (Wycombe)
Maude, Angus
Walker-Smith, Rt. Hn. Sir Derek


Hamilton, Losd (Farmanagh)
Maudhng, Rt. Hn. Reginald
Walters, Dennis


Hamilton, Michael (Salisbury)
Mawby, Ray
Ward, Dame Irene


Harris, Frederic (Croydon, N.W.)
Maxwell-Hyslop, R. J.
Weatherill, Bernard


Harrison, Brian (Maldon)
Mills, Peter (Torrington)
Wells, John (Maidstone)


Harrison, Col. Sir Harwood (Eye)
Mills, Stratton (Belfast, N.)
Whitelaw, Rt. Hn. William


Harvey, Sir Arthur Vere
Monro, Hector
Williams, Donald (Dudley)


Hastings, Stephen
Montgomery, Fergus
Wills, Sir Gerald (Bridgwater)


Hawkins, Paul
Moore, Jasper
Wilson, Geoffrey (Truro)


Heald. Rt. Hn. Sir Lionel
Morrison, Charles (Devizes)
Wood, Rt. Hn. Richard


Heath, Rt. Hn. Edward
Munro-Lucas-Tooth, Sir Hugh
Woodnutt, Mark


Heseltine, Michael
Nicholls, Sir Harmar
Worsley, Marcus


Higgins, Terence L.
Nott, John
Wylie, N. R.


Hiley, Joseph
Orr, Capt. L. P. S.
Younger, Hn. George


Hill, J. E. B.
Osborn, John (Hallam)



Hirst, Geoffrey
Osborne, Sir Cyril (Louth)
TELLERS FOR THE AYES:


Holland, Philip
Page, Graham (Crosby)
Mr. Antbony Royle and


Hordern, Peter
Pearson, Sir Frank (Clitheroe)
Mr. Humphrey Atkins.


Howell, David (Guildford)
Peel, John



NOES


Albu, Austen
Brown, R. W. (Shoreditch &amp; F'bury)
Edwards, William (Merioneth)


Allaun, Frank (Salford, E.)
Buchan, Norman
Ellis, John


Alldritt, Walter
Buchanan, Richard (G'gow, Sp'burn)
English, Michael


Allen, Scholefield
Butler, Herbert (Hackney, C.)
Ennals, David


Anderson, Donald
Butler, Mrs. Joyce (Wood Green)
Ensor, David


Archer, Peter
Cant, R. B.
Evans, Albert (Islington, S.W.)


Armstrong, Ernest
Carmichael, Neil
Evans, loan L. (Birm'h'm, Yardley)


Ashley, Jack
Carter-Jones, Lewis
Fitch, Alan (Wigan)


Atkins, Ronald (Preston, N.)
Castle, Rt. Hn. Barbara
Fletcher, Raymond (Iikeston)


Atkinson, Norman (Tottenham)
Coe, Denis
Fletcher, Ted (Darlington)


Bacon, Rt. Hn. Alice
Coleman, Donald
Foley, Maurice


Bagier, Gordon A. T.
Conlan, Bernard
Foot, Michael (Ebbw Vale)


Barnes, Michael
Corbet, Mrs. Freda
Ford, Ben


Barnett, Joel
Crawshaw, Richard
Forrester, John


Beaney, Alan
Cronin, John
Fowler, Gerry


Bence, Cyril
Crosland, Rt. Hn. Anthony
Fraser, John (Norwood)


Benn, Rt. Hn. Anthony Wedgwood
Crossman, Rt. Hn. Richard
Freeson, Reginald


Bishop, E. S.
Cullen, Mrs. Alice
Gardner, Tony


Blackburn, F.
Dalyell, Tam
Garrett, W. E.


Blenkinsop, Arthur
Davles, Harold (Leek)
Ginsburg, David


Booth, Albert
Davies, Ifor (Gower)
Gordon Walker, Rt. Hn. P. C.


Boston, Terence
Delargy, Hugh
Gray, Dr. Hugh (Yarmouth)


Bottomley, Rt. Hn. Arthur
Dell, Edmund
Gregory, Arnold


Boyden, James
Dempsey, James
Grey, Charles (Durham)


Braddock, Mrs. E. M.
Diamond, Rt. Hn John
Griffiths, Eddie (Brightside)


Bradley, Tom
Dickens, James
Griffiths, Rt. Hn. dames (Llanelly)


Bray, Dr. Jeremy
Doig, Peter
Griffiths, Will (Exchange)


Brooks, Edwin
Dunnett, Jack
Gunter, Rt. Hn. R. J.


Brown, Rt. Hn. George (Belper)
Dunwoody, Mrs. Gwyneth (Exeter)
Hamilton, James (Bothwell)


Brown,Bob(N'c'tle-upon-Tyne,W.)
Dunwoody, Dr. John (F'th &amp; C'b'e)
Hamilton, William (Fife, W.)


Brown, Hugh D. (G'gow, Provan)
Edwards, Robert (Bilston)
Hamling, William







Hannan, William
Mackie, John
Roberts, Albert (Normanton)


Harper, Joseph
Mackintosh, John P.
Roberts,Rt.Hn.Goronwy(Caernarvon)


Harrison, Walter (Wakefield)
Maclennan, Robert
Roberts, Gwilym (Bedfordshire, S.)


Hart, Rt. Hn. Judith
McNamara, J. Kevin
Robertson, John (Paisley)


Haseldine, Norman
Mahon, Peter (Preston, S.)
Robinson,Rt.Hn.Kenneth(St.P'c'as)


Hattersley, Roy
Mahon, Simon (Bootle)
Robinson, W. O. J. (Walth'stow, E.)


Hazell, Bert
Mallalieu, E. L. (Brigg)
Rodgers, William (Stockton)


Heffer, Eric S.
Manuel, Archie
Roebuck, Roy


Henig, Stanley
Marks, Kenneth
Rogers, George (Kensington, N.)


Herbison, Rt. Hn. Margaret
Marquand, David
Rose, Paul


Hobden, Dennis (Brighton, K'town)
Marsh, Rt. Hn. Richard
Rowlands, E. (Cardiff, N.)


Hooley, Frank
Mason, Rt. Hn. Roy
Shaw, Arnold (Ilford, S.)


Horner, John
Maxwell, Robert
Sheldon, Robert


Houghton, Rt. Hn. Douglas
Mendelson, J. J.
Shinwell, Rt. Hn. E.


Howarth, Harry (Wellingborough)
Mikardo, Ian
Shore, Rt. Hn. Peter (Stepney)


Huckfield, Leslie
Millan, Bruce
Short, Mrs. Renée (W'hampton, N.E.)


Hughes, Rt Hn. Cledwyn (Anglesey)
Miller, Dr. M. S.
Silkin, Rt. Hn. John (Deptford)


Hughes, Emrys (Ayrshire, S.)
Milne, Edward (Blyth)
Silverman, Julius


Hughes, Hector (Aberdeen, N.)
Mitchell, R. C. (S'th'pton, Test)
Skeffington, Arthur


Hughes, Roy (Newport)
Moonman, Eric
Slater, Joseph


Hunter, Adam
Morgan, Elystan (Cardiganshire)
Small, William


Hynd, John
Morris, Alfred (Wythenshawe)
Snow, Julian


Irvine, Sir Arthur (Edge Hill)
Morris, Charles R. (Openshaw)
Spriggs, Leslie


Jackson, Colin (B'h'se &amp; Spenb'gh)
Morris, John (Aberavon)
Steele, Thomas (Dunbartonshire, W.)


Jackson, Peter M. (High Peak)
Moyle, Roland
Stewart, Rt. Hn. Michael


Jay, Rt. Hn. Douglas
Mulley, Rt. Hn. Frederick
Strauss, Rt. Hn. G. R.


Jeger, George (Goole)
Murray, Albert
Summerskill, Hn Dr. Shirley


Jeger,Mrs.Lena(H'b'n&amp;St.P'cras,S.)
Neal, Harold
Swingler, Stephen


Jenkins, Hugh (Putney)
Newens, Stan
Symonds, J. B.


Jenkins, Rt. Hn. Roy (Stechford)
Oakes, Gordon
Taverne, Dick


Johnson, Carol (Lewisham, S.)
O'Malley, Brian
Thomas, Rt. Hn. George


Jones, Dan (Burnley)
Oram, Albert E.
Tinn, James


Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)
Orme, Stanley
Tuck, Raphael


Jones, J. Idwal (Wrexham)
Oswald, Thomas
Varley, Eric G.


Kelley, Richard
Owen, Dr. David (Plymouth, S'tn)
Walden, Brian (All Saints)


Kenyon, Clifford
Owen, Will (Morpeth)
Walker, Harold (Doncaster)


Kerr, Dr. David (W'worth, Central)
Page, Derek (King's Lynn)
Wallace, George


Kerr, Russell (Feltham)
Paget, R. T.
Watkins, Tudor (Brecon &amp; Radnor)


Lawson, George
Palmer, Arthur
Weitzman, David


Ledger, Ron
Pannell, Rt. Hn. Charles
Wellbeloved, James


Lee, Rt. Hn. Frederick (Newton)
Park, Trevor
Wells, William (Walsall, N.)


Lee, Rt. Hn. Jennie (Cannock)
Parkyn, Brian (Bedford)
Whitlock, William


Lee, John (Reading)
Pavitt, Laurence
Wilkins, W. A.


Lestor, Miss Joan
Pearson, Arthur (Pontypridd)
Willey, Rt. Hn. Frederick


Lewis, Arthur (W. Ham, N.)
Peart, Rt. Hn. Fred
Williams, Alan (Swansea, W.)


Lewis, Ron (Carlisle)
Pentland, Norman
Williams, Alan Lee (Hornchurch)


Lipton, Marcus
Perry, Ernest G. (Battersea, S.)
Williams, Clifford (Abertillery)


Lyon, Alexander W. (York)
Perry, George H. (Nottingham, S.)
Williams, Mrs. Shirley (Hitchin)


Lyons, Edward (Bradford, E.)
Prentice, Rt. Hn. R. E.
Williams, W. T. (Warrington)




Willis, Rt. Hn. George


Mabon, Dr. J. Dickson
Price, Christopher (Perry Barr)
Wilson, William (Coventry, S.)


McBride, Neil
Price, Thomas (Westhoughton)
Winnick, David


McCann, John
Price, William (Rugby)
Woodburn, Rt. Hn. A.


MacColl, James
Probert, Arthur
Woof, Robert


MacDermot, Niall
Randall, Harry
Yates, Victor


Macdonald, A. H.
Rankin, John



McGuire, Michael
Rees, Merlyn
TELLERS FOR THE NOES;


McKay, Mrs. Margaret
Rhodes, Geoffrey
Mr. Harry Gourlay and


Mackenzie, Gregor (Rutherglen)
Richard, Ivor
Mr. J. D. Concannon.

Further Amendments made: No. 232, in page 71, line 44, leave out from beginning to 'vested' and insert 'said rights were'.

No. 233, in page 72, leave out lines 1 to 7 and insert:
(2) Where, immediately before the happening of a chargeable event, the rights conferred by any policy or contract were vested beneficially in two or more persons, or were held on trusts created, or as security for a debt owed, by two or more persons, paragraphs (a) and (b) of sub-paragraph (1) above shall have effect in relation to each of those persons as if he had been the sole owner, settlor or debtor, but with references to the amount of the gain construed as references to the part of it proportionate to his share in the rights at the

time of the event or, as the case may require, when the trusts were created.
(3) References in sub-paragraphs (1) and (2) above to the rights conferred by a policy or contract are, in the case of an assignment of a share only in any rights, references to that share.

No. 234, in page 72, line 40, at end insert:
For the purposes of this sub-paragraph, the number of years for which a policy of life insurance has run before the happening of a chargeable event shall be calculated, where appropriate, from the issue of the earliest related policy, meaning, any policy in relation to which the policy is a new policy within the meaning of paragraph 9 above, any policy in relation to which that policy is such a policy, and so on.

No. 235, in page 73, line 21, leave out from 'the' to 'the' in line 23, and insert:
'rights or share in question were held immediately before the happening of the chargeable event on trust'.

No. 236, in page 73, line 38, at end insert:

Orders of the Day — PART III

SUPPLEMENTARY PROVISIONS

Duty of insurers, etc. to certify qualifying policies, and to give information about chargeable events

18A.—(1) Subject to sub-paragraph (3) below, where a policy of life insurance issued in respect of an insurance made after 19th March, 1968 is, in the opinion of the body by whom it is issued, a qualifying policy within the meaning of Part I of this Schedule, it shall be the duty of that body to give to the policy holder a duly authenticated certificate to that effect.

Any such certificate shall be given within three months of the issue of the policy, or, if later, within three months of the passing of this Act, and shall specify the name of the policy holder, the name of the person whose life is assured, the reference number of other means of identification allocated to the policy, the capital sum or sums assured, and the amounts and dates for payment of the premiums.

(2) Subject to the said sub-paragraph (3), where a policy of life insurance is varied after the said 19th March and, in the opinion of the body by whom it was issued, is after the variation a qualifying policy within the meaning of the said Part I, it shall be the duty of that body, within three months of the making of the variation, or, if later, within three months of the passing of this Act, to give to the policy holder a like certificate with respect to the policy after the variation.

(3) Where, in the case of any policy, or any policy after a variation, the total premiums payable in any period of twelve months do not exceed £26, a certificate need be given under sub-paragraph (1) or (2) above only if requested in writing by the policy holder, and, if so requested, shall be given within three months of receipt of the request; and sub-paragraph (2) above shall not apply by reason of—

(a) any variation which, whether or not of a purely formal character, does not affect the terms of a policy in any significant respect, or
(b) any variation of a policy issued in respect of an insurance made on or before 19th March 1968, other than a variation by virtue of which the policy falls, under section 16(5) of this Act, to be treated as issued in respect of an insurance made after that date.

(4) Subject to sub-paragraph (5) below, where a chargeable event within the meaning of Part II of this Schedule has happened in relation to any policy or contract, the body by or with whom the policy or contract was issued,

entered into or effected shall, within three months of the event or, if it is a death or an assignment, within three months of their receiving written notification thereof, deliver to the inspector a certificate specifying—

(a) the name and address of the policy holder,
(b) the nature of the event, and the date on which it happened,
(c) as may be required for computing the gain to be treated as arising by virtue of the said Part II—

(i) the surrender value of the policy, or the sum payable, or other benefits to be conferred, by the body in question by reason of the event,
(ii) the amount or value of any relevant capital payments,
(iii) the amounts previously paid under the policy or contract by way of premiums, or otherwise by way of consideration for an annuity, and
(iv) the capital element in any payment previously made on account of an annuity, and

(d) the number of years relevant for computing the appropriate fraction of the gain for the purposes of paragraph 17(3) above.

(5) Sub-paragraph (4) above shall not apply where—

(a) the body in question are satisfied that no gain is to be treated as arising by reason of the event, or
(b) the amount of the surrender value or sum, or the value of the other benefits, referred to in paragraph (c)(i) of that sub-paragraph, together with the amount or value of any payments within paragraph (c)(ii) thereof, does not exceed £500,

but the inspector may by notice in writing require a like certificate in any such case, and it shall be the duty of the body to deliver the certificate within thirty days of receipt of the notice.

(6) Sections 46 and 47 of the Finance Act, 1960 (penalties) shall have effect as if sub-paragraphs (4) and (5) above were included in the third column of Schedule 6 to that Act. —[Mr. Diamond.]

Orders of the Day — Clause 17

SMALL MAINTENANCE PAYMENTS

The Minister of State, Treasury (Mr. Dick Taverne): I beg to move Amendment No. 186, in page 14, line 24, leave out from 'thereof' to ' shall' in line 25.
The procedure for bringing this Clause into force—it concerns small maintenance payments—was intended to enable it to be postponed until after the coming into force of the Bill promoted by the right hon. and learned Member


for St. Marylebone (Mr. Hogg) on maintenance orders. I understand that that now has the Royal Assent and that it is likely that this Bill and the Maintenance Orders Act will come into operation at the same time. Therefore, there is no longer any need for the special procedure formerly laid down. Now, Clause 17 will come into force automatically. This will simplify the matter and there will be no need for any special Treasury Order in future.

Amendment agreed to.

Further Amendment made: No. 187, in page 14, line 27, leave out from 'on' to end of line 28 and insert ' the passing of this Act'.—[Mr. Taverne.]

Orders of the Day — Clause 18

CASH BASIS, ETC.: POST-CESSATION AND OTHER RECEIPTS

Mr. Diamond: I beg to move Amendment No. 75, in page 16, leave out lines 17 and 18 and insert:
(a) the decision has been taken to prepare accounts reflecting the change, or.
This is a relieving Amendment. The Bill as drafted excluded from the new charge on post-cessation receipts those arising from a genuine pre-Budget day change of accounting basis. Questions were raised as to the meaning of that and I promised to give the matter further consideration. I now agree that the Bill as originally drafted was unnecessarily restrictive. Therefore, the Amendment would substitute for the requirement of a written notice to the Inspector of Taxes one that a decision had been taken before Budget day to prepare accounts reflecting the change, and any argument about whether a decision had been taken or not would be settled in the ordinary way.

Mr. Charles Fletcher-Cooke: All I will say is that we are grateful.

Amendment agreed to.

Orders of the Day — Schedule 10

CASH BASIS, ETC.

Mr. Diamond: I beg to move Amendment No. 76, in page 76, line 20, leave out 'twelve months 'and insert' two years'.
This is a relieving Amendment and deals with a matter which was raised by the Opposition. Out of the generosity of our hearts, we have not only granted what they asked but gone a little further. That is to say, we have met the points which they raised and have thought it right to adjust another Section of the Act in the same way.

Amendment agreed to.

Further Amendment made: No. 77, in page 76, line 29, at end insert:
(2) In section 33(3) of the Finance Act, 1960 (election as respects tax chargeable by virtue of section 32 of that Act corresponding to the election under this paragraph) for the words ' twelve months' there shall be substituted the words 'two years'.—[Mr. Diamond.]

Mr. Fletcher-Cooke: I beg to move Amendment No. 68, in page 77, line 5, at end insert:
9.—(1) Where an individual who is chargeable to tax under subsection (1) of the principal section pays a premium or other consideration under an annuity contract for the time being approved by the Commissioners of Inland Revenue under this paragraph (hereinafter in this paragraph referred to as 'a qualifying premium') the amount of the qualifying premium shall, subject to the following provisions of this paragraph, be deducted from the amount which would otherwise be chargeable to tax by virtue of that subsection for the year of assessment in which the qualifying premium is paid, and if the qualifying premium exceeds that amount the excess shall be carried forward, and shall be treated for the purposes of this paragraph as the amount of a qualifying premium paid in the next following year, and so on for succeeding years (if necessary).
(2) Subject to sub-paragraphs (3) and (4)' below, subsections (2) and (3) of section 22 of the Finance Act, 1956 shall have effect in relation to this paragraph as they have effect in relation to that section.
(3) The Commissioners shall not approve the whole of a contract for the purposes of this paragraph unless it appears to them that the aggregate value of the benefits, of whatever nature, afforded by the contract and by any other contract or contracts made by the individual and approved by the Commissioners under this paragraph or under section 22 of the Finance Act, 1956 is reasonably comparable to the value of the benefits usually afforded


by statutory superannuation schemes to persons who have held an office or employment during the period in which the trade, profession or vocation was carried on by the individual and whose emoluments therefrom were equal to the profits or gains which arose to the individual from the trade, profession or vocation, and the Commissioners may, if they think fit, aporove a contract made by an individual born before 6th April, 1917 subject to the condition that the relief afforded by this sub-paragraph shall be taken in substitution for the whole or part of the relief which the individual would otherwise obtain under section 19 of this Act.
(4) The Commissioners may approve a contract under this paragraph notwithstanding that it provides for the annuity payable to the individual to commence after he attains the age of seventy if it provides for that annuity to commence within one month of the date when the contract is made.
(5) The Commissioners may, if they think fit, approve a part of a contract, and where they do so this paragraph shall have effect as if the part of the contract which is approved and the part of the contract which is not approved were separate contracts, and the premium or other consideration paid by the individual shall be apportioned between the two parts in such manner as may be just.
(6) The Commissioners may at any time, by notice in writing given to the persons by and to whom the premiums are payable under any contract for the time being approved under this paragraph, withdraw that approval on such grounds and from such date as may be specified in the notice.
(7) Where an election is made under paragraph 6 of this Schedule as respects sums received in any year of assessment a qualifying premium paid in that year may be deducted from those sums notwithstanding that the tax is to be charged as if those sums were received immediately after the discontinuance, but no amount shall be deducted more than once under this paragraph.
(8) Where an individual pays a qualifying premium within six months after the beginning of a year of assessment he may, by notice in writing sent to the Inspector before 6th October in that year elect that for the purposes of relief under this paragraph the premium shall be treated in the same way as if it had been paid in the preceeding year of assessment and not in the year in which it is paid, and any relief given in consequence of the election for the earlier year shall be given by way of repayment of tax.
(9) Any annuity paid under a contract for the time being approved by the Commissioners under this paragraph shall be treated as earned income of the annuitant to the extent to which it is payable in return for any amount deducted under this paragraph, but this sub-paragraph shall only apply in relation to the annuitant to whom the annuity is made payable by the terms of the contract.
(10) No relief shall be given under section 23 of the Finance Act, 1956 in respect of any amount deducted under this paragraph, and

section 27 of that Act shall not apply in relation to any annuity to the extent to which it is payable in reurn for any amount deducted under this paragraph.
The Amendment looks enormously long, but is in fact immensely modest and small. It makes a very small amelioration in the case of pensions for the self-employed. We have put down three or four new Clauses hoping to make some serious Amendments to the 1956 provisions for pensions of the self-employed, but they were not selected and I shall not attempt, on the peg of this Amendment, to hang the arguments which I would have liked to deploy then.
As is well known, under the self-employed pension arrangements, first there is no right of commutation; second, there is no effective carry-forward of any under-contributions for any year due to an insufficiency of earnings for that year; third—this becomes relevant to the Amendment—there is no provision whereby the income of the final 36 months, whether of trading or of professional earnings, can be related to the pension scheme, that is, the well-known two-thirds rule which applies in every other calling; and fourth, no regard is had to subsequent inflation.
The Amendment is really concerned only with the third of those objectives. Under the Bill as drafted, those who have to pay tax from now on on their post-cessation receipts are, of course, allowed to write-off, although they have discontinued trading, certain expenses of the trade. Even though they have discontinued trading, they are allowed against the receipts subsequently received after the dates of cessation of trading to write off expenses. Schedule 10, by paragraph (1), provides for certain allowable deductions on the footing that, if the trade had not been discontinued, they would have been admissible in computing for tax purposes the profits or gains of the individual.
5.0 p.m.
What we seek to do by this Amendment is, basically, to add to that permission the premium for a self-employed person, that is to say, he would be able to debit against the new subject matter of the charge, the post-cessation receipt, the cost of providing for his retirement annunity. This is a modest Amendment because even that opportunity, modest as


it is, is hedged about with many restrictions. It will be subject to precisely the same requirements as are laid down by the Finance Act, 1956, but with an additional safeguard. Only where the individual can show that the retirement annuity secured by him at the date of the discontinuance is less than two-thirds of the yearly average of his final three years' income or salary, could he use the amelioration at all, and even then his chargeable contribution will be limited to securing the difference between the annunity provided at discontinuance and the two-thirds ceiling.
The two-thirds test is precisely that which is applied in relation to schemes approved by the Commissioners under Section 388 of the 1952 Income Tax Act. Even after that safeguard, there is a further safeguard. There can be no duplication under the fading provisions of Clause 19 to those of a certain age under the Bill as it is drafted. In other words, one cannot have it both ways. If one wishes to take advantage of this Amendment, one cannot also take advantage of those fading provisions.
I marvel at the modesty of the Amendment considering what a blow the self-employed have been struck by these two Clauses and the Schedule in the Bill.

Mr. Diamond: The hon. and learned Member marvels at the modesty of this Amendment. I marvel at his capacity to use the word"modesty"in describing an Amendment which would wreck the whole scheme. Perhaps I had better concentrate on his use of the word. I hope that he will bear with me while I take him through the figures.
The aggregate value of the benefits usually afforded on a statutory superannuation scheme—and on that the hon. and learned Member was modelling his proposal—is roughly for the full lifetime service, 40 years' service, six times the average annual salary in the last three years. A professional man who has just retired and wishes to provide equivalent benefits for himself to start immediately would have to pay a premium of something like six times his average annual profits over the last three years. It is almost inconceivable that post-cessation receipts will ever be as large as that, so the relief under the Amendment would complete!)' wipe out the tax charge on

the post-cessation receipts if they were used to buy an annuity.
The proposal, modest though it is, is a proposal to eliminate completely the liability for practical purposes to tax of post-cessation receipts. It would return to the situation where those who have their tax calculated on an earnings basis pay their normal, proper, fair tax, and those who have their profits and accordingly their tax, calculated on a cash basis are sought to have this benefit of having their post-cessation receipts entirely free, in the majority of cases, of tax.
In those circumstances, as obviously the hon. and learned Member wishes to make progress, I do not think I need deal with any of the other points in the proposal. I hope that, in those circumstances, he will not wish to press it.

Mr. Fletcher-Cooke: I am not sure whether I require the leave of the House to speak again. If so, I ask for it. I am amazed at the attitude of the Chief Secretary. This is a modest proposal. It would apply only where the individual can show that the lifetime annuity secured by him is less than two-thirds of the average of his yearly income. Even if he can use that, his chargeable contribution would be devoted to securing the difference between that and the two-thirds ceiling.

Mr. Diamond: I hear what the hon. and learned Member is saying about an annuity, but I am sure that he has taken my point on board. I am not talking about the amount of the annuity, but the sum set aside to purchase an annuity which has to come out of the post-cessation receipts.

Mr. Fletcher-Cooke: I think that is a misunderstanding. One takes account of the premiums paid under the 1956 Act. I agree that by a fell swoop one cannot buy an annuity to be paid for out of the post-cessation receipts and seek to put oneself in that favourable position, but the professional people who would be hit by this Clause would already have taken out self-employed insurance under the 1966 Act to a greater or lesser extent. What we are seeking to do is to ensure that out of their post-cessation receipts they should be allowed to pay sufficient to bring themselves up to within the two-thirds rule. Of course, many would not be able to do so because they would not


have sufficient post-cessation receipts. All we are seeking is in a modest, moderate and partial way to treat those who are hardly hit by the Clause in the same way as others.
Since we want to make progress and the Chief Secretary has taken an extreme opposition view to this proposal, all that I can ask him to do now is to recognise, as I thought he partially recognised in Committee, the fact that on commutation of the two-thirds rule the difference between the self-employed and those who can have the benefit of Section 388 of the 1952 Act is now monstrous. I hoped that if he could not accept this Amendment, he would at least say that the Treasury was thinking how to reconcile these two classes of Her Majesty's subjects so that there would not be the unfairness which here will prevail.

Amendment negatived.

Orders of the Day — Schedule 11

QUOTED SECURITIES HELD ON 6TH APRIL, 1965: ELECTION FOR POOLING AT VALUE ON THAT DATE

Mr. Taverne: I beg to move Amendment No. 56, in page 78, line 9, after 'assessment', insert:
'or accounting period of a company'.
I wonder, Mr. Deputy Speaker, if, in moving this Amendment, I may refer to the following Amendments: Nos. 57, 58, 59, 60 and 65. All are concerned with the same point.

Mr. Deputy Speaker (Sir Eric Fletcher): If the House so pleases, so be it.

Mr. Taverne: These six Amendments amend provisions in the Capital Gains Tax law which contain elections for the taxpayer to have his liability to tax on capital gains paid in one way rather than another. The effect of the Amendments is that, in the case of a company, the time limit for the election to be made is related to the date at which the company's accounting period ends instead of the end of the year of assessment, which remains the date for individuals. The end of the accounting period is the natural and sensible date to use in the case of companies. Indeed, the Amendments

have the support of the accountancy profession.
The three decisions with which the Amendments are concerned are, first, the election under paragraph 25 to Schedule 6 to the Finance Act to have the gain on certain assets which were acquired before 6th April, 1965 computed by reference to their value at 6th April, 1965 and not on a time apportionment basis. The second election with which the Amendments are concerned is the election under Section 33 of the Finance Act, 1967, under which a taxpayer can elect to have gain on disposals of land with development value computed, not by reference to changes in its current value, but by reference to changes in its overall value. The third provision is that under Schedule 11 to the Bill, under which a taxpayer may elect to have his gain on quoted shares or securities acquired before 6th April, 1965 computed solely by reference to their value at that date.
The time limit for these elections would in all cases run out at the end of the second year of assessment; that is, the second year following the year of assessment in which the disposal was made. Under the Amendments the time limit for companies would be two years after the end of the accounting period in which the disposal was made. The position now is that, both for individuals and for companies, the election period is two years from the date when he would normally be considering his tax affairs. I repeat that this has the support of the accountancy profession. I therefore hope that the Amendments will commend themselves to the House.

Mr. Michael Shaw: On behalf of the accountancy profession, I welcome the Amendment and thank the hon. and learned Gentleman. I tabled Amendments to achieve some, though not all, of the objectives outlined by the hon. and learned Gentleman. Those Amendments were not called, but on reflection I accept that the wording tabled by the Government is much more comprehensive than that I used in Committee.

Mr. Taverne: I should perhaps have expressed my thanks before to the hon. Members for Scarborough and Whitby (Mr. Michael Shaw) and for Yeovil (Mr. Peyton), who were associated with the


Amendment which, if it commends itself to the House, will find itself in the Bill.

Amendment agreed to.

Further Amendment made: No. 57, in page 78, leave out lines 11 to 13.—[Mr. Taverne.]

Orders of the Day — Schedule 12

CAPITAL GAINS

Amendments made: No. 66, in page 81, line 32, at end insert:
(3) A person who is a lessor of tied premises shall be treated as if he occupied (as well as used) those tied premises only for the purposes of the relevant trade.
This sub-paragraph shall be construed in accordance with section 26(2) of the Finance Act, 1952 (income tax and corporation tax on tied premises).

No. 58, in page 83, line 31, after 'assessment', insert' or accounting period of a company'.

No. 59, in line 33, leave out from 'allow' to end of line 35.

No. 60, in line 43, at end insert:

Land in Great Britain: election excluding valuation at current use value

6. In section 33(3) of the Finance Act, 1967 after 'end of the year of assessment', there shall be inserted ' or accounting period of a company, and the definition of 'year of assessment' shall be repealed.

No. 61, in line 20, leave out 'only' and insert 'not'.

No. 62, in line 21, leave out from 'if' to end of line 22 and insert:
'the person, or any of the persons, to whom any gain accrues on the transfer is a company'.

No. 63, in page 91, line 5, after ' transaction ', insert ' on or after 6th April 1965'.

No. 64, in line 7, at end insert:
(4) If, under sub-paragraph (2) above, a reduction is made in an allowable loss, any chargeable gain accruing on a disposal of the shares or securities of any other company which was a party to the depreciatory transaction by reference to which the reduction was made, being a disposal not later than six years after the depreciatory transaction, shall be reduced to such extent as appears to the inspector, or on appeal to the Commissioners concerned, to be just and reasonable having regard to the effect of the depreciatory transaction on the value of those shares or securities at the time of their disposal:
Provided that the total amount of any one or more reductions in chargeable gains made by reference to a depreciatory transaction shall

not exceed the amount of the reductions in allowable losses made by reference to that depreciatory transaction.
All such adjustments whether by way of discharge or repayment of tax, or otherwise, as are required to give effect to the provisions of this sub-paragraph may be made at any time. —[Mr. Taverne.]

Orders of the Day — Clause 32

GIFTS FORMING PART OF NORMAL EXPENDITURE OF DECEASED

Amendment made: No. 130, in page 27, line 8, at end insert:
'or, on an appeal under section 10 of the Finance Act 1894, of the court entertaining the appeal'.—[Mr. Taverne.]

5.15 p.m.

Mr. Taverne: I beg to move Amendment No. 131, in page 27, leave out lines 14 to 19 and insert:
(2) A payment of a premium on a policy of assurance on the life of the deceased, or a gift of money or money's worth applied, directly or indirectly, in payment of such a premium, shall not for the purposes of subsection (1) above be regarded as part of the normal expenditure of the deceased if, when the insurance was made, or at any earlier or later time, an annuity was purchased on the life of the deceased, unless it is shown to the satisfaction of the Board or, on an appeal under section 10 of the Finance Act 1948, of the court entertaining the appeal, that the purchase of the annuity and the making or any variation of the insurance, or of any prior insurance for which the first-mentioned insurance was directly or indirectly substituted, were not associated operations.
The Amendment widens the terms of subsection (2), which is designed to ensure that premiums paid on a policy of assurance in cases where there was a back-to-back arrangement cannot be exempt as normal income gifts. In the common back-to-back arrangement, as the House will be aware, someone whose life may be uninsurable in the ordinary course insures his life and at the same time buys an annuity out of which the premiums are paid. The purchase of the annuity enables the insurance company to undertake the insurance. The annuity is income and has had to be taken into account in applying the normal and reasonable test in the past; and, without special provisions, it would be taken into account for the new tests in subsection (1). In these cases the premiums are in effect being paid out of the capital which the deceased used to buy his annuity.
Hence subsection (2). This tackles the problem by dealing with the case where, as an associated operation, the deceased effected a policy of assurance on his life and bought an annuity and was denied exemption for premiums which he paid on the policy. There is an easy way round this provision. An existing back-to-back arrangement could, in effect, be continued in such a way that the premiums qualified for exemption as normal income gifts. This could be done by substituting for the policy originally taken out by the husband a new one which is taken out on his life by the wife and

5
(7) Subject to the following subsections, this section shall not apply to property passing on the death as comprised in a gift of, or of rights under, a policy of assurance on the life of the deceased issued in respect of an insurance made before 20th March 1968.


(8) If the aggregate value of all policies related to the death which were issued in respect of an insurance made before 20th March 1968 exceeds £25,000 the relief given by subsection (7) above shall apply only to a fraction of the said property, and that fraction shall be £25,000 divided by the said aggregate value:


10
Provided that the rate at which estate duty is to be charged in respect of that fraction of any property shall not be less than the rate at which it would have been charged if the relief given by subsection (7) was not restricted by this subsection.


(9) The relief given by subsection (7) above in respect of a policy which had matured or been surrendered before 20th March 1968 shall not be reduced under subsection (8) above, and the value of all such matured or surrendered policies shall be left out of account under the said subsection (8).


15
(10) If the terms of a policy are varied after 19th March 1968 in such a way that the value of the policy is greater than it would have been if no variation had been made—



(a) the relief given by subsection (7) above shall apply only to such part of any gift as can justly be attributed to the value the policy would have had if not varied, and


20
(b) the policy shall be brought into subsection (8) above at that value, and the fraction in that subsection shall be applied to the said part of the gift.


25
(11) Where by virtue of subsection (8) or subsection (10) above, or of both of those subsections, the relief given by subsection (7) above applies only to a part of any gift, the part of the gift to which the relief does not apply shall in accordance with sub-section (1) above be property in which the deceased had an interest and shall be aggregated under section 4 of the Finance Act 1894 accordingly.


(12) The provisions of this section shall apply to a contract for a deferred annuity becoming payable on the death of the deceased as if it were a policy of assurance of the life of the deceased.


30
(13) For the purposes of this section—


35
(a) the value of a policy is the amount or value, as at the death, of the sums payable or other benefits arising under the policy, whether or not the policy continues on foot until the death, except that the value of a policy which has been surrendered at a time before the death is the value at that time of the consideration for the surrender;


(b) a policy is related to the death if it is a policy on the life of the deceased, if property comprised in a gift of, or of rights under the policy passes on the death, and if that property would, if this section had not been enacted, have been property in which the deceased never had an interest.

Mr. Deputy Speaker: I suggest that with this Amendment the House should discuss the following Amendments:
No. 275, in page 28, line 19, leave out subsection (6) and insert:

then the husband pays the premiums directly or through his wife. It is to meet that problem that the Amendment is tabled.

Amendment agreed to.

Orders of the Day — Clause 33

AGGREGATION

Mr. Diamond: I beg to move Amendment No. 132, in page 28, line 20, leave out from '1968' to end of line 34 and insert:

(6) This section shall apply in the case of a death after 19th March 1968 but where the property which passes in the death consists of a gift of rights under a policy of insurance issued in respect of an insurance made before 20th March 1968 (and so that but for this subsection, the gift would be dutiable under section 34(2) of the Finance Act, 1959 (gift


by payment of premium on policy)) such property shall be dutiable (if at all) as if this section had not been enacted.

No. 276, in line 20, leave out from '1968 ' to end of line 34 and insert:
Provided that where the property which passes on the death consists of a gift of rights under a policy of insurance issued in respect of an insurance made before 20th March, 1968 and passes on the death under the said section 2(1 )(c) by virtue of section 34(2) of the Finance Act, 1959 (gift by payment of premium on policy), then this section shall only apply thereto if and to the extent that the dutiable amount of such property exceeds £25,000, such dutiable amount being calculated in accordance with the said section 34(2) and after making any reduction under section 64 of the Finance Act, 1960 (graduation of charge), and this proviso shall be applied to each such policy of insurance which so passes.

The Amendment to Amendment No. 132, in line 6, leave out from 'above' to end of line 7 and insert:
'shall apply only to the first £25,000 of the said property'.

No. 277, in page 28, line 31, leave out '£25,000' and insert '£50,000'.

No. 278, in line 31, at end insert:
Estate duty arising as a result of this section shall only be payable on the amount by which the total sums payable or other benefits arising under all policies of insurance related to the death exceed £25,000.

No. 279, in line 32, after ' subsection ', insert:

(i) the words ' policy of insurance' shall include a contract for a deferred annuity, and
(ii).

No. 281, in line 34, at end add:
(7) For the purposes of subsection (6) above, the payment by the deceased of the premium for a single premium policy of insurance shall be treated as operating to keep up the policy within the meaning of that expression in the said section 34(2).

No. 282, in line 34, at end add:
(7) Where the total amount or value referred to in paragraph (b) of subsection (6) above exceeds £25,000 but does not exceed £37,500, this section shall not apply to a fraction of the amount or value of any property passing on the death under the said section 2(l)(c) by virtue of the said section 34(2) in consequence of any such gift as is referred to in paragraph (a) of that subsection, such fraction having a denominator equal to that total amount or value and a. numerator equal to twice the sum by which it falls short of £37,500.
(8) Where the said total amount or value exceeds £25,000 and, after any application of subsection (7) above, the total estate duty payable on the death of the deceased apart from this subsection would be greater than the aggregate of—


(a) the amount by which that total amount or value exceeds £25,000, and
(b) the total estate duty that would be so payable if subsection (7) above had been omitted from this section and the amount or value of each item of property passing as specified in that subsection were reduced to a fraction of its amount or value equal to the ratio of £25,000 to the said total amount or value,

then the total estate duty payable on the death of the deceased shall, after any application of subsection (7) above, be further reduced to the amount of the said aggregate by rateable reduction of the duty payable on the respective items of property subject to duty.

No. 283, in line 34, at end add:
(7) Property passing on the death of the deceased, either as property comprised in any gift or other disposition made by the deceased in his lifetime in favour of, or of any of, the spouse and children of the deceased, or as an annuity or other interest purchased or provided for, or for any of, the spouse and children of the deceased, shall be exempt from estate duty up to a total amount or value of dutiable property and interests so passing, determined after making any reduction under section 64 of the Finance Act 1960 (graduation of charge on gifts), of £25,000 for any one death; and such exemption shall be given by rateable reduction of the amount or value of all such dutiable property and interests as aforesaid (after first making any such reduction under the said section 64 as aforesaid).

Mr. Diamond: Perhaps I should deal with these various matters fairly broadly so as to cover all the arguments, as there was some possibility of a slight misunderstanding at an earlier stage.

Mr. Patrick Jenkin: I apologise for intervening so early in the Chief Secretary's speech. We are all extremely fond of the Financial Secretary and he was in very grave difficulties, but I think it is only fair to say that he made a proper muck-up of trying to explain this in Committee.

Mr. Diamond: I am sorry that in Committee the Opposition, including the hon. Member for Yeovil (Mr. Peyton), were unable completely to follow my hon. Friend the Financial Secretary, who speaks not only with great warmth of heart and entertaining wit, but with an immense clarity of diction. I shall return to the point and hope that I shall be more successful.

Mr. John Peyton: ): I concede this to the Chief Secretary. We heard every word that the Financial Secretary said. Whether the Financial Secretary


understood a word that he said we were uncertain. We certainly did not.

Mr. Diamond: There is nothing like starting off on an agreed basis—that the Opposition did not understand one word. Perhaps in these circumstances it would be wiser and safer for me not to risk misleading anyone by using words which have been fairly carefully prepared to make this group of Amendments clear.
The main purpose of the Amendments is to implement the undertaking which my hon. Friend the Financial Secretary gave in Committee to extend the relief for policies of assurance taken out before Budget day. The relief as it stands gives an exception from the new rule of aggregation only when the total benefits arising under all pre-Budget policies which are to any extent within the charge to Estate Duty on the death of the assured do not exceed £25,000.
The Amendments which we are now discussing add to this relief where the total benefits exceed £25,000. This new relief consists in excluding from the new rule of aggregation the proportion of the amounts chargeable to Estate Duty in respect of such policies which £25,000 bears to the total benefits. The intention underlying the original relief, where the total benefits involved were not more than £25,000, was to provide for the case in which it could be said that the provision for dependants was "comparatively modest". It will be remembered that my right hon. Friend the Chancellor used those words in his Second Reading speech. The figure of £25,000 was selected as representing a reasonable judgment of what a modest provision was. But it would be unfair to leave the matter there and to give no relief at all where the total benefits exceed £25,000, perhaps by only a small amount.
There are various possible marginal provisions which could be devised, but the Chancellor has chosen what I hope the House will agree is the generous one of excluding from the new rule of aggregation in all cases the chargeable amounts rateably attributable to £25,000 of the total benefits. The total benefits arising under a policy will commonly be greater than the amount on which Estate Duty is chargeable in respect of the policy, because there are two limitations on the

charge. The first limitation is by reference to the premiums paid in the period since March, 1963, and within seven years before the death compared with the total premiums. Second, there is a limitation on account of taper relief, that taper relief being 15 per cent., 30 per cent., or 60 per cent., as the case may be, on premiums paid in the early part of the gifts period.
Thus, the new relief following the approach in the existing Clause 33 has regard to the total benefits arising under the policies as the fundamental basis of the relief and not the amount on which any Estate Duty is chargeable. It is the total actual benefits arising which are the proper measure of a comparatively modest provision. On that footing, only the amounts chargeable which are attributable to £25,000 of the total benefits ought to be relieved.
The various Amendments have been tabled on that basis. The main purpose of the Amendments is achieved in the new subsections (7) and (8). There are some other changes to which I shall now shortly refer. The relief is extended so as to embrace single premium policies which are described by the words in the new subsection (7) as "a gift of … a policy". This relates to an Amendment put down by hon. Members opposite in Committee, and repeated on Recommittal but not reached and, therefore, not debated.
Another change is that any pre-Budget policies which have matured or been surrendered before 20th March are completely excepted from the new rule of aggregation. That is provided under subsection (9).
Subsection (10) deals with policies which are varied after Budget day so as to increase their value. The subsection allows relief only for the part attributable to the policy before variation. A policy may be varied in amount or terms without constituting a new policy, and provision is necessary to prevent someone who had pre-Budget insurances for, say, £1,000 from taking advantage of the relief under the Clause by increasing the value by means of a variation to, say, £25,000.
The new subsection (2) extends the relief to cover deferred annuities payable


on the death of the deceased, thus meeting the point made in Amendments put down in Committee by hon. Gentlemen opposite but, again, not reached.
I have attempted to describe accurately and slowly the precise proposals embodied generally in these Amendments. I dare say that hon. Gentlemen will have points to make and will wish to discuss the matter at length. I think that the most convenient course now would be for me to leave the matter there and listen carefully to the ensuing debate.

Mr. Patrick Jenkin: The Chief Secretary will not be surprised when I tell him that there are many people who regard Clause 33, next to the aggregation of minors' income, as one of the most important matters in the Bill. It makes a major change in the pattern of Estate Duty and removes what has hitherto been regarded as a settled and well established method of disposing of one's property in such a way as to reduce liability to Estate Duty. There is little doubt that the aspect of this change, far-reaching thought it is for the future, which has given rise to the greatest indignation on the part of the public is the manifestly retrospective effect of the Clause on policies taken out before Budget day.
There can be little doubt that, even with the relief which was embodied in the Bill—of which no word had been said in the Budget—and even with the minor addition, for such it is, in the Amendment now before us, this retrospective abrogation of the benefits of non-aggregation which applied to policies taken out before Budget day has caused a grievous disruption of the carefully planned provision for dependants made in many thousands of families throughout the country. In some cases, the change effected by the Clause, and hardly ameliorated by the relief which the right hon. Gentleman has just described, has been little short of catastrophic. Men have entered into irrevocable transactions, divesting themselves of property in circumstances in which they relied upon the existing law, and the effect on their transactions has been virtually to destroy them overnight. To my mind, this comes manifestly within the category of cases in which a change in the law should not be made with retrospective effect.
Several of the Amendments which are being taken at the same time would achieve the object that the change in the law—which we could, perhaps, discuss separately as to its merits—should apply only in respect of policies taken out after Budget day. I am absolutely convinced that that would be right. The Chief Secretary may or may not have heard the speech which I addressed to the Committee on Clause 30, the extension of the gift period from five to seven years, in which I put what seemed to me to be the appropriate distinction between cases in which it is legitimate to legislate with retrospective effect and cases in which it is wrong so to legislate.
I shall not repeat those arguments now, save to say that there is a clear distinction between cases, on the one hand, in which one is changing a law which has been well settled for many years, which has been recognised over and over again in subsequent legislation passed by the House and which has been relied on by the taxpayer, with the full knowledge and consent of the Revenue—and in this particular case with agreement made by the Revenue with the Life Offices Association —in which retrospection is manifestly unjust, and, on the other hand, those cases in which one is seeking to close loopholes exploited by clever accountants and lawyers, that is, cases in which a measure taken one year to deal with one form of tax avoidance device or another can be seen in the following year not to have succeeded in its purpose because someone has by his ingenuity found a way round it. In such circumstances, there might well be a case for retrospective legislation.
5.30 p.m.
I recounted to the Committee a number of examples from Finance Acts since the war which showed that the distinction which I put to the Committee had been followed to the letter. There were many cases in which changes had been made in Estate Duty legislation—and it is particularly in Estate Duty legislation that this sort of situation arises, because one is dealing wih transactions in which the tax becomes chargeable in the future— and in which exactly that distinction had been followed. I shall not repeat them.
Whatever else one may say, it is clear that the benefit of non-aggregation of


policies in which the deceased never had an interest falls without any doubt into the case in which retrospective legislation should not have been introduced. The first reason for that is that non-aggregation has existed since 1894. It was built into the Finance Act of that year in that property in which the deceased never had an interest was not to be aggregated with the rest of his estate.
It has become an established feature of the Estate Duty picture. It has been recognised over and over again by the courts and by Parliament. Parliament itself cast a benevolent eye on this relief, for such it is, in 1954, when Parliament legislated to close a manifest avoidance device by which people were taking out a whole series of separate policies in favour of a single beneficiary. Parliament legislated to stop that but did nothing to alter the benefits of non-aggregation.
Secondly, in 1959 Parliament put on to a firm statutory footing the dutiability of policies by reference to the number of premiums paid within the gift period, then five years, now seven years. There was no reference in the Section on that occasion to non-aggregation. It was assumed to be a permanent feature of the legislative scene.
Thirdly, there was the agreement to which I have referred with the Life Offices Association. It is to be found in a letter which that Association put out and from which I will read only one paragraph:
The whole purpose of the offices' self-imposed restrictions in this area of 'combinations'"—
that is, the combined policy, the back-to-back—
is therefore directed to ensuring that there is proper underwriting—in other words, if the life to be assured does not measure up to a minimum standard of health, then the contract will not be issued.
The reason for that is that the life offices knew perfectly well and they had discussed it with the Revenue that that sort of underwriting represented a tax avoidance device.
The letter continues:
There are two long-stops to this important underwriting restriction. The first merely affirms the normal practice of most offices of not taking a life over age 80—the other limits

the combination effected in any one year to £50,000, if both contracts are issued by the same office.
The agreement was there. Policies were issued on the faith of it. It does not lie in the mouth of any Chancellor of the Exchequer thereafter unilaterally to abrogate the basis on which those policies were issued, yet that is exactly what the Clause and the Bill do.
The excuse which was offered to a member of the public who wrote to the Chancellor was as follows, and I quote from a letter dated 13th May and signed by the Private Secretary to the Chancellor to a Mr. Shaw. I should make it clear that I am not referring to my hon. Friend the Member for Scarborough and Whitby (Mr. Michael Shaw). The reply states:
The Revenue, whilst welcoming it"—
that is, the voluntary limitation—
made it clear that it would not be treated as limiting Ministers' freedom to take such legislative action as they might think fit about these policies.
I ask the Chief Secretary, to whom did the Revenue make it clear that it did not regard itself as bound by that?
I have a letter from a leading firm, perhaps the leading firm, of insurance brokers—these are the people to whom it was supposed to have been made clear that the agreement was regarded by the Revenue as not binding upon it— stating:
For many years there has been an agreement between the Treasury and the Life Offices Association under which it has been regarded as reasonable for policies to be effected up to a maximum figure of £50,000 (securing in appropriate cases non-aggregation). If the Clauses are to stand as drafted, therefore, I would suggest that there is an irrefutable case for altering the £25,000 to £50,000.
There is an Amendment which would achieve that.
To do otherwise would, it seems to me, be retrospectively discrediting an agreement between Her Majesty's Treasury and a recognised trade society.
How can it possibly lie in the mouth of Treasury Ministers to say that it has been made clear to all the people in that case that it did not regard itself as bound by the agreement which it made with the Life Offices Association? Indeed, the Chancellor admits that there is justice in the argument about retrospection because


he is prepared to introduce the £25,000 exemption. This provision for £25,000, both as in the Bill and subject to the Amendment moved by the Chief Secretary, is, as I hope that the right hon. Gentleman will appreciate, a very modest one. What is still worse is that it has the most wildly haphazard results. I will deal with those presently.
Despite the relief, however, the Clause represents a break in faith with responsible bodies who have acted in full accordance with the wishes expressed over many years by the Treasury and the Inland Revenue. The result is to cause serious disruption of people's legitimate expectations.
The cases that one will quote, and which have, I am sure, been quoted to many hon. Members, on both sides, will, of course, be of people of some means, because it is in cases where the rates of duty are very high, as they are in this country, that the effect of the removal of the relief of non-aggregation has a correspondingly swingeing effect.
I would like to quote one or two of the examples which have come to me. Perhaps, with the leave of the House, I might read this letter in full:
As one of the trustees of a life policy annuity scheme, it is my duty to distribute the proceeds arising from two policies, which have become payable as the result of my mother's death on 5th April this year.
One cannot fight for oneself, but on this occasion I have no personal interest except to try and fight for the 30 beneficiaries under these two policies who were due to receive varying amounts up to £5,000. This was not a haphazard figure but was the one chosen because at that time moneys due under a life policy were assessed as a separate estate and benefits up to £5,000 per individual were not liable to tax.
When my mother made these arrangements, she was delighted to be able to help so many people. She died a few days too late in the knowledge that these arrangements had probably failed in part, as the policies amounted to more than £25,000. Arranging one's affairs prudently today is rather like sitting down to play cards, when the rules can be changed in the middle of the game to suit the house.
If you can do anything to put right the injustice of Clause 33 of the 1968 Finance Bill, I should be extremely grateful".
That is a typical example of the sort of reaction to which the Chancellor's proposals in the Bill have given rise.
My next quotation indicates that one is dealing not only with wealthy people disposing of their wealth, but with people

in close companies who have built up businesses by their own hard work and who have seen their life's work virtually disappear overnight. A letter to my right hon. Friend the Member for En-field, West (Mr. Iain Macleod) states as follows:
I joined this company"—
a well-known company—
as a director in 1926 at the age of 24. I invested £500 in the company, and each year I ploughed the profits back into the business, living on a very low income which I believe at that time was about £450 a year. The business continued to expand year by year, until in 1947 my accountant drew my attention to what a serious position would arise in the event of my death.
A little lower down he goes on:
I realised that by all my hard work and enterprise I was going to leave my wife and four children with a very serious problem had I died at that time.… I immediately took steps to increase my life cover and to spread my estate amongst my wife and my four children. I effected life insurance policies to a total of just over £85,000. … Until yesterday"—
the letter was written the day after the Budget—
the situation was adequately covered, and in the event of my death adequate insurance was going to be available to meet death duties, as these policies had been written under the Married Women's Property Act for the benefit of my four children. The news this morning that these are now aggregable in my estate has completely altered the position, and all my plans for the last forty years have gone in the last twenty-four hours. How I shall finally resolve this position I do not know, but my immediate reaction is to surrender all my life policies, and thereby reduce my estate, and go on a buying spree for the remainder of my life. There does not appear anything now that I can do that will avoid the necessity of selling the company shares to meet Death Duty liabilities. This company, in which I invested £500 in 1926, today has a market value of £1,750,000, but I feel almost a criminal for having done it. Certainly all enterprise and initiative have been finally knocked out of me, and I am sure there must be thousands more in industry who feel in exactly the same manner.
Did the Chancellor realise that this would be the effect of the Clause? Does he seriously believe that by this fiddling little Amendment for the £25,000 exemption he is doing anything to resolve the case of those people who took out policies on the faith of the existing law and arrangements made by the life offices with the Inland Revenue? One can well understand the despair of professional advisers faced with this. I quote a letter


from another leading firm of insurance brokers:
How can we or any professional insurance adviser give advice based on insurance law to any client when an act of this long standing can be changed by a few words from a socialist chancellor—changed not only for future life policies, but for those too which may have been in effect for thirty or forty years? We can now no longer give advice on matters with confidence.
One can well understand the writing of the leading tax commentator, Alun Davies, in the Daily Telegraph on 14th May:
Like the restriction of the marriage allowance to the period of marriage in the first fiscal year, the gesture on M.W.P.A. policies is a mean one, worthy only of a fiscal Scrooge.
In Press article after Press article in the financial and quality newspapers, writers have been appalled at what the Government have done and certain that it could not go unamended. What have we got? We have an Amendment which makes the most marginal effect and does virtually nothing to help the tens of thousands of cases where people will be penalised to the extent of hundreds of thousands of £s. However, even the Government recognised that they could not defend the position where the exemption was to be for policies of a total value of £25,000, and with full aggregation if the policy came to £25,001. Therefore, we have this so-called marginal relief—if that is the right word—for the first £25,000.
But that is not what it means. This is where the Financial Secretary's instinct was right when he first introduced the Clause, but when he was put right by his advisers he had to tell us exactly what the Amendment meant. We had some bizarre scenes of confusion in the last moments before the Guillotine fell in Committee when the Financial Secretary announced this concession. It relates to the dutiable slice of the policy relating to the premiums paid in the last seven years.
5.45 p.m.
We now know what the Financial Secretary said was all wrong. The Revenue issued a statement, and the relief is now as it was spelt out in the Amendment —to which my right hon. Friend the Member for Enfield, West referred as the Mark II. This has produced results—I

hope that the Chief Secretary appreciates this—which are hardly less bizarre than those which would have occurred before. The formula involves bringing into the calculation the non-dutiable slice of the insurance policy. The relief is to be quantified by reference to property which is not subject to duty. Why confine oneself to the non-dutiable slice of insurance policies? Why not bring in all the gifts made beyond seven years ago? It is a weird way of quantifying any relief.
The position is complicated by the effect of the tapering provisions, and in my calculation I shall exclude them because they make it complicated to understand. The figures, therefore, are not strictly right, but I hope they will illustrate the point.
The bizarre effect of the Mark II concession is that the longer the policy has run the smaller is the slice which is non-aggregable. Let us assume that one has a policy worth £100,000 and that it has run for four years, and the whole of the policy money is dutiable and the first £25,000 is non-aggregable. But if it has run for 28 years only seven-twenty-eighths or one quarter is dutiable. Yet the slice which remains non-aggregable is reduced from £25,000 to a quarter of that, which is £6,200. I emphasise that I am ignoring the tapering provisions. When one comes to longer periods virtually the whole of the dutiable slice becomes aggregable and the benefit of non-aggregation is virtually valueless. It is a weird result. It would not have happened if the Mark I concession had been adopted. Our Amendment would restore the Mark I position. I believe that even now the Government must accept it.
We abhor this retrospective legislation. We believe that it is entirely wrong in this case and is doing a grave injustice to those who relied on the word of the Chancellor, the Treasury and the Government. This modest Amendment to the Chancellor's Amendment is one way in which the right hon. Gentleman can put right the grave wrong which has been done.

Mr. Peyton: This is not only an odd Clause but an evil one. It was begotten in muddle and dishonour. I agree with the very strong condemnation that my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) has just uttered against it.
One particularly odd characteristic of the handling in the Standing Committee, it seemed to me, was that the Financial Secretary, the meaning of whose words was almost entirely lost upon me, made an announcement which meant one thing and an explanation was issued the following day by Ministers' mentors, the Press officers at Somerset House, London, W.C.2, explaining what the Minister meant. I wonder whether the Chief Secretary to the Treasury would care to comment on this at some stage, or perhaps the Minister of State, who is to reply, would like to get up now and say whether it is normal for Ministers in the present Government to be corrected by Press officers at Somerset House. To my mind, it seems undesirable and wrong.
I endorse all the comments which my hon. Friend the Member for Wanstead and Woodford made about retrospection. To us it smacks of bad taste. I wonder whether the Ministers and their advisers have questioned themselves as to what are the likely long-term consequences of Government behaviour of this kind. My hon. Friend has produced two very telling examples of two people who made perfectly legitimate disposals of their assets to people who hoped to benefit out of this, and then, at the last minute in one case, the Government intervene callously, without thought, without knowledge of the grounds on which they are treading, and alter the whole basis on which those plans depended. I cannot believe that the Government have contemplated what the long-term effect of this sort of action will be on the confidence of the industry and individuals.
My hon. Friend has already referred to the question of the insurance industry's understanding with the Inland Revenue. We are told that the Inland Revenue had informed the industry that it might renege on its promise, that it did not mean what it appeared to mean. We are entitled to a much more adequate explanation than we are likely to have from present Treasury Ministers of this kind of conduct.
What importance are the life offices to attach to any future understanding they may have with the Inland Revenue? Is any such understanding, though reached in good faith on their part, and though they base their business plans on it, to be liable to reunciation on the whim of

Ministers, Ministers, moreover, who are not trusted and no longer command credit throughout the country?
When the decision was first announced in the Chancellor's Budget Speech, I singled it out as one of the more vicious things in a Budget that was intended to be vicious. Few of us will forget the Chancellor's peroration then, when he turned to gather the harvest of Left-wing cheers as he announced that he was really giving the cane to those who were not his political supporters.
Two of my constituents wrote to me about this. Neither is a very rich man. One happens to be a very distinguished public servant whose record of service to the State is far greater than anybody now on the Treasury Bench can claim. Yet at one time it looked as though the whole of his arrangements had been made worthless, and there was very little sympathy from the Government. The present proposal has helped these people slightly, but I assure the Minister of State—I know not whether he cares— that such people have a residue of deep resentment and distrust. They have made their arrangements, which have been undermined at the Government's whim and in disregard of a promise made by the Commissioners of Inland Revenue. What kind of integrity is that?
I have put down an Amendment, Amendment No. 277, proposing that instead of being £25,000 the figure should be £50,000. I do not see why the Government should not give way on this. We are deeply disappointed that they did not see fit to exempt all Married Women's Property Act policies entered into before the Budget. Then, whatever may be said about the breach of the understanding with the life offices, at least it would not have had retrospective effect.
I have been a Member of Parliament for about 17 years. On previous occasions when we had a Tory Government these little retrospective horrors were inserted in Finance Bills. Although the services of back-benchers to the State are not always noticed, there were on those occasions Members who were prepared to vote against their own party and not put up with that kind of conduct because they thought it dishonourable. Certainly on all those occasions when


such provisions were in any way offensive, the nasty, obnoxious content was removed from the Bill. But this time we have had no one on the Government side, no one on the Front Bench opposite, who has felt even the slightest reaction of disgust. One would not expect anything so strong as that, but there has not even been a slight twinge of unease. Yet the Government are playing ducks and drakes with relations between themselves and the public at a time when public confidence in our institutions is not very strong.
I have often wondered to what extent thought is given in the councils of the Inland Revenue to the relations between the tax-gathering authorities and the public I admit that they have an odious job, and for the most part they do it with great skill and fairness. I am sure that that is their objective, but I question whether that very desirable state of affairs can be expected to continue if Governments are encouraged or allowed by their advisers to perpetrate actions which many fair-minded, honourable people regard as dishonest.
What I have said was a fairly restrained version of the views widely held by those of my constituents who have fairly and legitimately made arrangements for the disposal of what they own. They have been affected by these arrangements for some years, as they are irrevocable so far as they are concerned, and the arrangements have now been seriously and to a large extent undermined There is not a note of apology from the Government, not a note of regret The Government lick their chops and look for cheap cheers. That is utterly disgusting. A plain appeal to the mob and to prejudice was what we had from the Chancellor at the end of his Budget speech.
This wanton inflicting of injustice, this contravention of the unwritten rules of fair play, is a discredit to Parliament and, if it is needed, a further measure in the great load of disgust which the Government deservedly bear on their shoulders.

6.0 p.m.

Mr. Michael Shaw: I support what has been so eloquently said by my hon. Friends the Members for Wanstead and Woodford (Mr. Patrick Jenkin) and Yeovil (Mr. Peyton).
I wish to make three points. First, it was a serious mistake not to exempt all policies which were in existence before 20th March this year. Secondly, harm has been done to the relationships between the Revenue and the life officers. I do not know what goes on in other countries, but I believe that this type of relationship is valuable in our society. So complicated is life these days that without this sort of relationship we should often be in very serious trouble. In the long term, it is bad that doubt should be cast on this relationship. I do not say that there will be distrust overnight, but in future those concerned must be more wary than they were in the past. They cannot have the same confidence in future as they had in the past as a result of what has happened. Anyone with experience in these matters knows that the types of policy which we are discussing have always been tailored to meet the requirements of the Revenue. This has been a very important factor in preparing this type of policy. When it is done with friendly understanding, such actions should be honoured.
As drafted originally, there was no exemption from aggregation in the Bill. After the pressure which was applied, exemption in respect of the first £25,000 was granted. My complaint concerns the way in which it has been granted. We tabled an Amendment in Committee showing how we believed exemption from aggregation should be effected. The Financial Secretary, speaking ad lib., gave his view of how it should be effected. The hon. Gentleman is regarded by all of us in this House, not as a fool, but as a shrewd and knowledgeable man in these matters. The significant thing is that both he and us came to the same natural conclusion as to how exemption from aggregation should be effected. Is it not extraordinary that hon. Members and people outside—in fact, everybody except the members of the Treasury Bench other than the Financial Secretary —should come to the same conclusion about the common sense way of exempting the first £25,000?
Apart from that being the logical way, in view of the size of the Amendment and the computations which have to be made in implementing the Treasury's method, there is not the slightest doubt that ours was not only the common sense and fair


way of proceeding, but also the simple way. This year, we have heard quite a bit about the hope for simplicity in future. I have no great faith in that hope, because this year more and more complications are being built in to our taxation system. One of the complications will be the method of working out this form of exemption.
I very much regret that the right hon. Gentleman will not accept an Amendment along the lines suggested by us. I am sure that everyone in industry and in the House believes that ours is a better and simpler method and that it should be adopted.

Mr. Tom Boardman: Unfortunately, I was not present during the earlier part of the debate. Amendment 87, which is in my name and that of one of my hon. Friends, concerns a restricted and limited point, namely, the non-aggregation of policies payable by reason of accidental death.
The Clause provides for the aggregation of all policies unless they were taken out before 20th March or possibly unless premiums are paid out of current income. It is, no doubt, contended that this is necessary, in the eyes of the Government, to avoid evasion of estate duty. But such an argument cannot apply to the type of policy covered by Amendment 87, because, by its definition, a policy payable for accidental death cannot be a policy taken out as part of an estate duty saving plan. No one can plan his Estate Duty affairs on the basis that he will die by accident. Therefore, exemption for accidental death policies comes into a different category.
I ask the Minister to consider the types of people affected. Take the man who has a small business worth perhaps £25,000, which the Financial Secretary said was a modest sum these days, and who, in order to protect his famiy from the grave consequences which might fall upon them if he should be killed and the business had to go under, takes out a life accident policy for a similar amount. Under the Bill, that would be aggregated with the value of his business and duty at the rate of 31 per cent. would be payable upon it.
Take the case of a man with a life interest amounting to a rather more substantial sum, £50,000, which does not,

under the terms upon which it was settled, pass to his family. He takes out an accident policy for, say, £30,000 of which £18,000 would go in estate duty if he should suffer a fatal accident.
Is this the way to encourage people to provide for their families? Is not a widow bereaved by an accident in which her husband has been struck down in the prime of life entitled to more consideration? Is the family tragedy to be treated as an opportunity for rich Treasury pickings? That is what will happen if accident policies are aggregated with all other policies.
Perhaps one of the worst features is that the form of aggregation suggested penalises the poor wife but not the rich wife. The wife with means of her own who can take out a policy on her husband's life from her own resources can avoid aggregation. The employee who is fortunate enough to be employed by a firm who takes out a policy against accidental death, the benefit of which would pass to the estate of the deceased employee or the widow or family of the deceased employee, would escape aggregation. But in the case of the wife with no means of her own, who is devoting her time to building up the home and is not going out to work to earn money and is unable to pay the premiums on a policy, the policy moneys payable in the event of her husband's accidental death are aggregated, with the consequences that follow.
I commend Amendment No. 87 to the House.

Mr. Walter Clegg: I think that my hon. Friend the Member for Leicester, South-West (Mr. Tom Boardman) has explained the case for this Amendment most admirably.
I would refer the Chief Secretary to several things which I consider could form precedents concerning the way that the State has already treated sums of compensation which become payable on death. Payments made under the Workmen's Compensation Acts, the Fatal Accidents Act, the Carriage By Air Act and the Industrial Injuries Act have never ranked for Estate Duty purposes. Therefore, we are asking here for something less than that. We are asking that there should be special treatment for moneys


coming into an estate flowing from death caused by accident.
Certain payments in the event of death under the Law Reform (Miscellaneous Provisions) Act form part of the estate, but these are of a minor nature. Normally, they are for loss of expectation of life and for pain and suffering. Under the Fatal Accidents Act, which is the nearer precedent of all, because, by its nature there has to be death by accident, any damages awarded to the widow and children do not form part of the estate for Estate Duty purposes. I understand they are free from that charge. Where there is a private arrangement during the lifetime of the parties, we suggest that there should be some concession when it comes to Estate Duty. This has always been so under the Fatal Accidents Act. I do not think that we are asking for a great deal more when we ask the Chief Secretary to look at it in this light.
We on this side, throughout the Finance Bill, have in many ways tried to protect the positions of widows and children of men killed in their prime. My hon. Friend the Member for Leicester, South-West has very cogently argued the need for this. Therefore, I hope that, even at this late stage, the right hon. Gentleman will consider whether something can be done.

Mr. Diamond: I will deal with the last point first and come back to the main stream of argument which has been put forward from the Opposition.
The suggestion made by the hon. Member for Leicester, South-West (Mr. Tom Boardman) and the hon. Member for North Fylde (Mr. Clegg) is that there should be some exemption where there is a policy covering death by accident. I was not clear whether what was meant was the ordinary type of life policy where perhaps a fixed sum is payable in the event of death or an additional sum payable in the event of death by accident. I do not think that alters the situation, because I take it that the hon. Member for Leicester, South-West was concerned with cover against accident and an accident arising. The hon. Gentleman suggested that this does not form part of any tax avoidance device and, therefore, there should be no aggregation.
The hon. Member for North Fylde sought to support his hon. Friend the

Member for Leicester, South-West by reference to the Fatal Accidents Acts, claiming that here was an example of an exemption from aggregation. The hon. Gentleman is not on solid ground in making that statement. Here is a case where the Estate Duty does not apply, because it is not property passing at death. It does not therefore, come within the scope of Estate Duty.

Mr. Clegg: Mr. Clegg indicated assent.

Mr. Diamond: I am grateful to the hon. Gentleman for nodding his assent. It does not come within the scope of Estate Duty. Therefore, there is no question of exemption from aggregation. I do not think that the hon. Gentleman was helping his hon. Friend's argument.
The hon. Member for Leicester, South-West sought, in a way which did not persuade me in the slightest, to say that a widow whose husband met with a motor car accident is someone for whom one should have sorrow, pity and understanding, but that a woman who is bereaved because her husband has a heart attack and drops down dead in the middle of his life, leaving a young family, is to be treated differently. I do not share that view. Both instances are equally regrettable. In my view, one cannot distinguish between death by accident and death arising through natural causes. It is a most unfortunate happening if it occurs early in life and the widow is left with difficult responsibilities to carry. But there is no reason why one should pick out one class of widow, as the hon. Gentleman did, and say that she is to be distinguished from other widows. I do not share that view. Therefore, I cannot possibly recommend that the Amendment we are discussing—I gather it has not been specifically moved, but we are discussing it—is one which should meet with the approval of the House.
6.15 p.m.
I turn now to the main argument dealing with retrospection and breach of faith. I think these are the main points. There is also the argument that the concession which has been made is in some respects inadequate. It is never the case that a concession meets with wholehearted approval, but this concession, at the figure of £25,000, will inevitably go a long way to remove any question of real hardship.
I will deal, first, with the argument of lack of faith. The hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) referred to a letter from a firm of brokers denying that there was an absolutely, pellucidly clear understanding that the Government, in acknowledging the help they were Teceiving by the self-discipline that insurance companies were placing on themselves, were nevertheless retaining their complete freedom of action. The hon. Gentleman referred to a letter from brokers. This arrangement and this making clear of the Government's freedom of action by the Government's officials, as the hon. Gentleman can imagine, is likely to have been done in all cases. Officials are always extremely careful about these matters. This was made clear at a meeting with the life offices. The brokers were not present. The life offices have never challenged what we are now saying. Up to this moment, there has been no challenge that what we are saying is not absolutely right. Our records show this. We have checked to make absolutely sure. There is no question but that it was made absolutely clear that the Government were retaining their freedom of action, as every Government must.

Mr. Patrick Jenkin: I think it is important to get one thing clear. Nothing has ever appeared in print about this agreement. No Press hand-out has ever been made and no public statement has ever been issued. This understanding was perfectly properly reached behind closed doors—I make no complaint about it—between representatives of the Inland Revenue and representatives of the Life Offices Association. After an announcement in the Press that I was to be the Opposition spokesman responsible for the handling of Clause 33, I received many letters. I have read only one to the House from insurance brokers complaining that they regarded this Clause as in breach of the arrangement. They say they knew nothing about it. It was wrong of the Chancellor's Private Secretary to write to one of them and say that it had always been made clear. Therefore, I ask the question again: to whom does the Chief Secretary allege this has been made clear? The right hon. Gentleman has so far told us that it was made clear to the life offices. What about everybody else?

Mr. Diamond: I am going further than alleging. I am affirming, after a recent review of the records so that memories alone are not to be relied upon, that the parties with whom the Government had discussions were left in no doubt that the Government retained their freedom of action. There is no argument after that to say that some insurance brokers, to whom this was no doubt a profitable business, in a perfectly proper way, are annoyed because that business has become somewhat limited. Of course they are likely to protest, and so is the Chairman of the International Fiscal Association, a body set up to keep down Income Tax, and in fact all taxes. That is the function of the organisation. I am saying that there is no breach of faith of the slightest kind by the Government. The Government entered into discussions and made their position clear, as I am sure every right hon. and hon. Gentleman realises anyone but the most thoughtless and irresponsible person would do. That deals with the argument whether £25,000 should be £50,000.

Mr. Peyton: When Governments, with their mighty machines, give undertakings to a limited number of people, or reach an understanding with a limited number of people, they cannot be heard subsequently to say that their undertaking was limited to that small audience in that small room. It goes right through the community. The right hon. Gentleman said that brokers found this a profitable business. They legitimately relied on that understanding. That is the point.

Mr. Diamond: The hon. Gentleman is putting far more than he is entitled to into what took place. In this respect, as in some others, the life assurance companies took the view that what was at £2,000 a head—as it originally was under the Married Women's Property Act—a reasonable matter to regard as a non-aggregable estate, had become a ramp, and it was no good for the business of the life offices that they were participating in a ramp. They co-operated because there is only one end to that kind of business. All that was said was that the Government recognised the position, but were free to act, as any Government must be, in the way they


thought right to protect the revenue and to raise revenue. There is no question whatsoever of any breach of faith, and there is no justification whatsoever for alleging that the £25,000 ought to have been at least £50,000.
I come, then, to the broader argument, that of retrospection. The argument here is that where we are dealing with Estate Duty which is duty collected on the net assets of a deceased person, and which always speaks as at the date of death, any arrangement entered into during the lifetime of an individual must be protected against any subsequent variation in Estate Duty law. That is an impossible proposition.

Mr. Patrick Jenkin: I never said that.

Mr. Diamond: I must have misunderstood the hon. Gentleman. Perhaps he will correct me.

Mr. Jenkin: The right hon. Gentleman ought to know that I have never advanced that proposition. I am sorry if he has not had a chance to read my speech in Committee on Clause 30. The Chancellor of the Exchequer was kind enough to approach me about it afterwards, as indeed was the Financial Secretary. That speech contained my full statement. Where there has been a long-settled, well-established practice, on the basis of which people have carried out their transactions and ordered their affairs, the matter should not be upset by retrospective legislation. That is the only proposition to which I have ever committed myself.

Mr. Diamond: That is a limited form of it and I am grateful for the correction that the hon. Gentleman has given. I have explained why I am not as fully informed of all the details of the previous debates on this topic as I would wish to be. The argument which is generally put forward—and the argument which lies behind the hon. Gentleman's assertion— is that we are unable to alter the Estate Duty provisions with regard to any matter as to which for some time there has been an exception or a mitigation. That is something which, equally, we cannot accept.
In the earlier debate a reference was made to the action of the then Conserva-

tive Government in introducing a modest form of partial aggregation in this very field. It was justified up to the hilt by the Treasury Minister of the time. This is a situation which one is bound to refute. It cannot be the case that a sensible accountant or solicitor—and I noticed with care that those who were either accountants or solicitors spoke with a good deal more moderation—would dream of advising his client that what is an appropriate arrangement to make to alleviate the Estate Duty position at the present time is something which will continue, and will be reliable for all time until the client dies. Any accountant or solicitor who wrote to his client and said, "I advise you to do so-and-so. It will help you in Estate Duty matters now, and you can rest assured that however long you live it will be of benefit to your estate", would be liable for damages in an action for negligence, because would be acting irresponsibly, knowing, from the practice of the law, that alterations take place every year. In my experience the matter is always made especially clear to a client because Estate Duty provisions are of necessity long term.
Advising a client on company matters, on business matters, on commercial matters and on Income Tax matters means giving advice on current affairs, but Estate Duty matters, by the essence of the thing, are long-term, and the person giving advice always dwells on that. It is untrue to say that a professional adviser would not have regard to this situation. People expect the law to change from time to time with regard to Estate Duty, and it does so change. It changes quite frequently to give retrospective benefits. I am sure that the hon. Gentleman would not argue about that. It changes from time to time to alter the position with regard to deaths in the future, and has immediate effect. If we were to accept what the hon. Gentleman is proposing we would never be in a position to change the rates of Estate Duty while anybody living was still alive.

Mr. Geoffrey Hirst: Nonsense.

Mr. Diamond: It is not nonsense. That is the proposition which is being advanced, that the Government are not entitled to vary the Estate Duty law with regard to future deaths of those who are still alive.

Mr. Patrick Jenkin: Who said that?

Mr. Diamond: That is the principle behind this proposal.

Mr. Peyton: All that we are maintaining—and I should have thought it was abundantly clear to anybody who wished to understand it—is that there should not be alterations to the ground rules on which actions have been based. If a man makes a binding and final arrangement for the disposal of his assets, meaning that he no longer has any control over those assets, we say that it is wrong to engage in retrospection which affects that transaction.

6.30 p.m.

Mr. Diamond: I have listened carefully to what the hon. Gentleman has said. I can only repeat that the argument, basically, as I see it is: there being no distinction between a practice which has lasted for two years and a practice which has lasted for 10 or 15 years, it does not affect the fundamental principle, which is: are the Government entitled to alter the law concerning Estate Duty so as to have an effect on those at present living?

Mr. Macleod: Of course they are.

Mr. Diamond: The right hon. Gentleman says, "Of course they are". In that case I need not argue the matter further. There can be no charge of a lack of faith or retrospection. We are doing what the previous Government have done in this matter. We are carrying the principle of aggregation further, and providing for those who might be affected— an exemption of a modest but quite generous kind.

Mr. Tom Boardman: As one who has had to give advice in such matters before coming here, may I ask whether the right hon. Gentleman confirms that the change previously made by the Conservative Administration was to close a loophole or to prevent a fiddle or an abuse that was then current? It is a completely different situation now.
Would not he also confirm that—

Mr. Speaker: Order. Interventions should be brief.

Mr. Diamond: No—I would not confirm that there is a clear distinction to be drawn between the previous action and

this one. I would not confirm that there has been no question of tax avoidance in these matters in recent times. If the hon. Member says that his party introduced the Measure in 1954 in order to counter tax avoidance I would say that there is also a strong element of that in the present proposal.

Amendment agreed to.

Mr. Patrick Jenkin: I beg to move Amendment 280, in page 28, line 34, at the end:
(7) Nothing in this section shall render aggregable any pension, annuity, lump sum, gratuity or other like benefit which is or may become payable in consequence of, or in connection with, the retirement, disability or death of any individual under—

(a) any enactment, or
(b) any fund, scheme or contract, and without prejudice to the generality of the foregoing words in particular—

(i) any fund or part of a fund approved under section 379 of the Income Tax Act, 1952;
(ii) any scheme approved under section 388 of the Income Tax Act, 1952; or
(iii) any contract approved under section 22 of the Finance Act, 1956.



This is a very short Amendment which is designed to clarify the position. I hope that the Chief Secretary will be able to give a favourable answer to my question, in which case it will not be necessary to spend much time on it. It would be extremely difficult to devise a retirement benefit for the pensioner—the man for whom the retirement benefit scheme was devised—in a form in which it would become liable to Estate Duty. These are, for the most part, benefits which follow upon retirement, and to the extent that they give rise to any liability it is a liability for the dependants.
But there are circumstances in which it would be very unjust if the benefit of non-aggregation were lost. This is in circumstances in which a man is entitled to a pension on his retirement but exchanges that right for the right to a pension of a lesser amount during his life, followed by a separate pension for his widow from his death and during her life. This would be a gift and would give rise to a passing under the Finance Act, 1894, in Section 2(1)(c). Under that legislation, if the husband did not survive the seven-year period from the making of the gift there would be no doubt that the


pension would have escaped aggregation if the value of the rights was less than £5,000—and if it was less than £5,000 it would not be dutiable.
Under the Bill, however, it seems that there might be a charge under Section 2(1)(d) of that Act as an interest purchased or provided and the prevailing charge would, under Section 33(3), have to be brought in. Under Section 2(l)(c) the Bill creates a risk that that sort of benefit would be liable to aggregation. This is a benefit which would arise indirectly under a retirement benefit scheme —under any statutory superannuation scheme or any Section 379 retirement pension or a Section 388 retirement benefit scheme. It could also arise under Section 22 of the Finance Act, 1956, which we were discussing earlier. Under any of those schemes it would be open to a man who retired to surrender part of his pension in return for a lower pension for himself and then, on his death, a pension for his widow for the rest of her life.
Is it really the intention that in those cases the benefit arising should be aggregated with the rest of the estate, or can the Chief Secretary assure us that there will be no question of aggregation in those few cases where the policy would be dutiable? If he can give the assurance for which I have asked we need not delay too long over the Amendment.

Mr. Diamond: I think I can give the hon. Member the assurance that he desires. It is not always easy to give an assurance on the basis of a speech that has been made, because the speech sometimes goes further than the Amendment on which the speech is based. I limit my assurance by saying that I assume that the hon. Member was not talking about ordinary insurance policies and was not seeking an assurance about them. I assume that he was talking as though the Amendment did not include them. It is possible to read the Amendment in that way. I feel sure that he was not intending otherwise, and I am therefore saying that I am not giving an assurance with regard to that part of the Amendment which might refer to insurance policies.
With regard to the rest of the Amendment, I can put the position shortly by saying that it is the Government's view

that there is no need for the Amendment in relation to approved superannuation or other death, disability or retirement benefits because they do not come under aggregation in any event.
The hon. Gentleman asked whether, as there was no liability under Section 2(l)(d) but there might be under Section 2(l)(c), I could help him. [Interruption.] Then I misheard what he said. I can confirm that it is not under subsection (l)(c) and that if there is any liability it is under paragraph (d), which charges annuities or other interests purchased or provided by the deceased to the extent of a beneficial interest arising on death. I assume that the Amendment is based on the view that part of the superannuation contributions could be regarded as laid out in order to make a gift to the beneficiary.
This is not so. Therefore, the main part of the Amendment—that is, the part designed to protect benefits under approved superannuation schemes and schemes for the self-employed—is superfluous.

Mr. Jenkin: I am happy to accept the right hon. Gentleman's assurance. It is clear that the Amendment does not refer to policies, and if I inadvertently mentioned them it was a slip. I meant to refer to pensions, gifts, lump sum annuities and similar benefits.
I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Mr. Patrick Jenkin: I beg to move Amendment 284, in page 28, line 34, at end add:
(7) Where the relevant gift or disposition occurred before 20th March, 1968, no person shall in consequence of this section be liable for any estate duty merely as a trustee or former trustee of a settlement or a trustee, guardian, committee, or other person in whom any interest in property passing or the management thereof is at any time vested, in excess of the estate duty which would have been payable by him if this section had not been enacted.
This Amendment also has been tabled to give the Treasury an opportunity to make it entirely clear that trustees will not be made personally liable for any increase in estate duty liability which may arise by virtue of the Clause in circumstances in which they may have distributed property or otherwise disposed of


assets before the change comes into effect. This was raised in Committee in connection with Clause 30, under which, again, trustees could have become personally liable for an amount higher than they would have retained to meet estate duty liability.
The Financial Secretary said on 29th May:
When a trustee, relying on the five-year gift period, has insured on that basis and therefore, not unreasonably has released the funds, it would be very hard if he were to be called on personally to make good any shortfall in the duty. I certainly undertake that in such cases the Revenue will rely exclusively upon its concurrent right to proceed against the beneficiary. I do not know whether that would be sufficient for the hon. Gentleman—"—
at which point I am reported as intervening to say, "Yes", and the Financial Secretary went on:
—or whether he feels it ought to be incorporated in legislation. However, I can assure him that in a case of that kind the Revenue would exclusively rely upon its right against the beneficiary."—[OFFICIAL REPORT, Standing Committee A; 29th May, 1968, c. 1755.]
I am sure that the Chief Secretary appreciates that exactly the same or a similar situation arises under this Clause, for instance, where a Married Women's Property Act or other trust policy has matured or been surrendered before the Budget, but the life assured dies after the Budget, having paid the premiums in the seven years before the death. In such cases, there may be premiums payable on his death for which the trustees would be accountable and although they may have kept sufficient money to pay the duty on a non-aggregable basis, they would not have had the foresight of a Hebrew prophet, which is what would be necessary, to retain sufficient duty to pay the difference between the non-aggregable and the aggregable duty.
Clearly, no personal blame could attach to trustees in these circumstances, so I hope that exactly the same assurance can be given in the case of a possible liability under Clause 33 as was given by the Financial Secretary in Committee about the potential liability under Clause 30. If the right hon. Gentleman can give that assurance, once again, I do not think that we need waste much time with this Amendment.

6.45 p.m.

Mr. Diamond: The hon. Member referred to a matter which was discussed

earlier and which relates to the responsibility of trustees arising from the new charge which we are discussing. In the normal course, there is no problem at all. That is to say, where the trustee knows the position before he disposes of the realisation of the policy, he is under the normal responsibilities and no special care need be taken. What the hon. Gentleman is referring to is a special difficulty which may arise when the policy has matured or been surrendered before Budget day, the policy moneys have been disposed of by the trustee and this difficulty now arises.
I am advised that, in effect, where the gift was a transaction entirely completed before the Budget, the trustees ought not to be required to account for tax, that they have, in these circumstances, acted reasonably in parting with the funds. We have had representations on this from other interests, and the Chancellor accepts that there is a case for relief for trustees in these circumstances. That is to say, when a policy matured or was surrendered before Budget day, an exception from the new rules of aggregation for such policies is provided. Therefore, there is no problem with regard to that matter.

Mr. Jenkin: It has, obviously, occurred to me that the substance of any complaint may have been removed by Amendment 132, which we discussed earlier, in that aggregation was not to apply in the case of surrenders or where policies had matured. But I feel sure that, if there are any residual cases— I cannot at the moment think of any— the same principle which the Financial Secretary enunciated on the earlier Clause will apply equally on this later one.

Mr. Hirst: I should be grateful if the right hon. Gentleman could explain his phrase "ought not to be held responsible" or "ought not to be required". It may be perfectly adequate, but I find it difficult to see the significance of it. Is the right hon. Gentleman giving the assurance that they will not be so required? I should be grateful for clarification.

Mr. Diamond: The hon. Gentleman is right. I was guilty of an ellipse. I should have spelled it out in its two parts


—first, on principle they ought not be, and, second, in law they are not.

Mr. Jenkin: I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Orders of the Day — Clause 35

MINERALS: BETTERMENT LEVY, INCOME TAX AND CORPORATION TAX

The Minister of State, Ministry of Housing and Local Government (Mr. Niall MacDermot): I beg to move Amendment 73, in page 30, line 24, leave out subsection (3) and insert:
(3) The regulations shall, as respects every mining lease, confer a right of election as respects the application to the mining lease of all provisions made in accordance with subsection (2) above so that—

(a) in the case of a mining lease granted on or after 6th April, 1968, an election may be made in accordance with the regulations excluding the application of those provisions;
(b) in the case of a mining lease granted before that date, no such provisions shall apply unless an election is made in accordance with the regulations.


Would it be convenient, Mr. Speaker, to discuss at the same time Amendment 74, which is consequential?

Mr. Speaker: If the House has no objections.

Mr. MacDermot: I am obliged.
I should perhaps begin by apologising for inflicting myself on the House again in a discussion on the Finance Bill. I am sure that the House had looked forward with the same relief that I had to the prospect of my not taking part in these debates again.
The first of these Amendments, No. 73, is the substantive one and is designed to meet the point of an Opposition Amendment in the names of the hon. Member for Yeovil (Mr. Peyton), the right hon. Member for Taunton (Mr. du Cann) and others in Committee, which was not reached. It substitutes a new subsection (3) for the present one in Clause 35. The effect of the alteration, if the House should approve it, is to give a right of election in all cases, that is to say, election whether to be assessed on the existing basis or on the new one.
Mineral leases are at present dealt with, for levy purposes, substantially the same as other leases. Therefore, subject to certain deductions in respect of base value, levy is, broadly speaking, assessed on the capital value of the lease at the time that it was granted, the capital value, that is, of the right to receive the rent or royalties. Because of the nature of mining leases and the royalties, it is seldom possible to quantify accurately in advance that value, and it has to be estimated. This has led to considerable complaints and to very few, if any, mining leases being granted. That was the reason for the provisions of Clause 35.
The serious objections from the landowner's point of view were, first, that he was charged by reference to an estimate of future royalties, second, that that estimate might be found to be materially excessive, and, third, that there was no provision for adjusting the levy by reference to the actual royalty income.
Second, the levy is assessed as a capital sum and ordinarily becomes payable shortly after the granting of the lease, whereas royalties may not begin to come in until some years later. Again, owing to the nature of mining leases, it is not possible for the grantor to meet this by taking a premium at the outset of the lease. There was a further difficulty where the grantor was a Surtax payer in that, whereas for levy purposes his liability to Income Tax would indirectly be taken into account, his liability to Surtax would not.
For those reasons, we introduced the Clause providing the new basis of assessment under which the levy would be chargeable from time to time on the royalties received or receivable under the lease. We thought it right to provide for an election in the case of leases which were granted before April this year so as to avoid any element of retrospective legislation. We gave people the choice, if they wanted it, to remain on the existing basis rather than be assessed on the new basis.
We did not provide any right of election in respect of leases granted after April this year for the simple reason that we thought, for the reasons which I have given, that it would always be to the benefit and advantage of the levy payer to be assessed on the new basis. But it


has been represented to us that there may be occasions when, in the case of future leases, people would prefer to be assessed and to pay their levy on the capital basis at the outset. We see no objection if that is the way they prefer to have it. The Amendment will accordingly give the right of election always in those cases.
Under this Amendment, unlike the Opposition's Amendment, we propose that the matter should be dealt with by regulations, but we make it mandatory by the Amendment that the regulations shall provide for a right of election. Perhaps I ought to give the House an indication of what we have in mind by way of provisions in the regulations.
The election would have to be irrevocable and would have to be made at the time of, or shortly after, the assessment of levy was sent to the person liable, which would normally be in the period of two months allowed for objecting to an assessment and serving a counter-notice. The assessment would in either case contain enough information to enable the levy payer to decide which was the more favourable basis for him. We should achieve that by seeing that it contained information about the amount which the Commission considered to be the capital value of the lease, the amount which appeared to the Commission to be the base value realised by the disposition, the amount appearing to the Commission to be the amount of any expenditure on improvements and ancillary rights allowed for in calculating the amount of the levy, and, finally, the amount appearing to the Commission to be the levy which would be charged on the net development value realised by the disposition if levy were to be charged on it at the prescribed rate.
One would then go on to state the percentage appearing to the Commission to be the effective rate in respect of the disposition, with a statement that the levy would be charged on royalties at the effective rate unless the levy payer within the two months to which I have referred exercised his election to pay it as a lump sum, that is to say, the principal amount of the levy. That notice would be subject to a counter-notice by the levy payer.

Amendment agreed to.

Further Amendment made: No. 74, in page 31, line 15, leave out 'pursuance of this section ' and insert:
'accordance with subsection (2) above'.—[Mr. MacDermot.]

Orders of the Day — Clause 36

THE SPECIAL CHARGE

Mr. Michael Shaw: I beg to move Amendment 99, in page 31, line 36, after ' individual', insert:
'being a man under 65 or a woman under 60 at the beginning of the year 1967–68'.
I had expected the sun to shine, the rain to pour and all extraordinary features of nature to be manifest at this moment because, at long last, and within five minutes only, we have to discuss in great detail the special charge. Our discussion, alas, will not be as great as we had wished, but, in the few minutes remaining, I hope to make sufficient points to convince the Government that our Amendment is acceptable.
The Chancellor described the reason for the special charge in these words on Second Reading:
The burden on those who can supplement their incomes out of capital is relatively less severe, and it is equitable that they should be called upon to make some additional contribution."—[OFFICIAL REPORT, 24th April, 1968; Vol. 763, c. 265.]
In other words, we are in so deep a crisis that we must needs gather from those whose incomes are large more than 100 per cent. of their income.

Mr. Joel Barnett: I am delighted to have the opportunity to intervene on this Clause. Where did my right hon. Friend say that that was the reason?

Mr. Shaw: I quoted his words from col. 265.

Mr. Barnett: But where did the Chancellor say that it was for that deep and dire reason?

Mr. Shaw: I beg the hon. Gentleman's pardon. I failed to say exactly when I ceased to quote, but, if he refers to the paragraph, he will see the point.
Clearly, the Chancellor's logic was tailored to fit the proposals which he made in the Budget. In my view, the special charge cannot be reconciled with


the overwhelming need of the country to encourage initiative and enterprise and the need for greater and greater investment by the people. The reasons for the tax are two. In the short term, sweeteners had to be handed out. In other words, this is a "cookie for the Kremlin", a sop to the Left wing. Even in Committee, the reactions of certain hon. Members made all too clear that that was one of the reasons. In the long term, throughout the period of the present Government, it has become more and more apparent that they are completely lacking in control of their own expenditure, and this is the second reason why additional money is needed.
We are now seeing more and more differences between earned income and investment income. Whatever arguments there may be for such differences, they are not valid in relation to people reaching the age of retirement, and it is to this that our Amendment is directed. We consider that the method by which a person prepares for his retirement, either by savings or by way of pension rights, is and should be a matter for his own judgment and not a matter which our taxation laws should inhibit.
If a person, when he retires, has, for example, an investment income of £3,000, apparently that is all right and his income is not subject to a special charge. If he has a pension of £5,000 a year he will have no Surtax to pay on £3,000 of it and he will have no special charge. If, however, he has had to save to provide such an income for his retirement, the additional income comes to him as investment income on the savings which he has made and he has to pay £1,150 special charge and, in addition, about £1,000 additional Surtax. We regard that as wrong. Those who are retired should be exempt from the special charge.

Mr. Terence L. Higgins: I support my hon. Friend the Member for Scarborough and Whitby (Mr. Michael Shaw) in this Amendment. It is certainly the case that we had at long last reached this particular section and it is certainly on—

It being Seven o'clock, Mr. SPEAKER proceeded, pursuant to Orders [18th June and 1st July] to put forthwith the Question already proposed from the Chair.

Question, That the Amendment be made, put and negatived.

Mr. SPEAKER then proceeded, pursuant to Orders [18th June and 1st July] to put forthwith the Questions on Amendments moved by a member of the Government.

Orders of the Day — Clause 37

INVESTMENT INCOME

Amendment made: No. 78, in page 33, line 26, at end insert:
(b) royalties or other sums paid for or in respect of—

(i) the copyright in a literary, dramatic, musical or artistic work, or
(ii) the use of a patent,

where the copyright or patent or the right to receive such sums has devolved by will or on intestacy on the death of the author or inventor, and the recipient took on that death or after one or more further devolutions on death, or.—[Mr. Roy Jenkins.]

Orders of the Day — Clause 41

RELIEF WHERE INCOME ATTRIBUTABLE TO PERIOD OF YEARS WAS RECEIVED IN 1967–68

Amendment made: No. 79, in page 39, line 13, leave out from 'that' to last ' the ' in line 16.—[Mr. Roy Jenkins.]

Orders of the Day — Clause 42

RELIEF WHERE CAPITAL IS SUBJECT TO ESTATE DUTY

Amendments made: No. 80, in page 40, line 23, after ' duty ', insert ' or capital gains tax'.

No. 81, in line 29, after 'duty', insert 'and capital gains tax'.

No. 82, in line 31, after 'duty', insert 'or capital gains tax'.

No. 83, in line 38, at end insert:
and references to capital gains tax payable in consequence of a death shall be construed in accordance with subsection (8) and subsection (9)(a) of section 26 of the Finance Act, 1965'. —[Mr. Roy Jenkins.]

Orders of the Day — Schedule 15

SPECIAL CHARGE: TRUSTS

Amendments made: No. 84, in page 99, line 18, at end insert:
'and then any election under paragraph 2 above as respects the first trust shall take effect also as an election as respects the second trust'.

No. 85, in page 101, line 25, leave out from beginning to second 'or' and insert ' estate '.—[Mr. Roy Jenkins.]

Orders of the Day — Schedule 17

SELECTIVE EMPLOYMENT TAX—AREAS FOR HOTEL ETC. REFUND

Amendments made: No. 244, in page 106, line 15, after ' Berwick-on-Tweed', insert:

Brampton.
Carlisle.

No. 245, in line 25, at end insert:

Annan.
Anstruther.
Arbroath.
Ayr.

No. 246, in line 26, leave out 'Jed-burgh Sub-Office'.

No. 247, in line 27, leave out 'Kelso Sub-Office'.

No. 248, in line 28, after 'Blairgowrie', insert:

Brechin.

No. 249, in line 28, after 'Kirkwall', insert:

No. 250, in line 29, after ' Lerwick', insert:

Lesmahagow.
Leven and Methil.

No. 251, in line 30, after 'Campbel-town' insert:

Carluke.

No. 252, in line 31, after 'Castle Douglas', insert:

Cowdenbeath.

No. 253, in line 31, after 'Lossie-mouth ' insert:

Montrose.

No. 254, in line 32, after ' Crieff', insert:

Cumnock.
Cupar.

No. 255, in line 33, after 'Newton Stewart', insert:

North Berwick Sub-Office.

No. 256, in line 35, after 'Perth', insert:

Peterhead.

No. 257, in line 37, after 'Eyemouth', insert:

Forfar.

No. 258, in line 38, after 'Rothesay', insert:

St. Andrews.

No. 259, in line 39, after 'Fort William ', insert:

Fraserburgh.
Galashiels.

No. 260, in line 40. after 'Girvan', insert:

Glenrothes.
Haddington.
Hawick.

No. 298, in line 40, after 'Stirling', insert:

Stonehaven Branch Office.

No. 263, in line 43, after ' Thurso ', insert:

Troon.

No. 264, in line 44, after ' Inverness ', insert:

Inverurie.
Kirkcaldy.

No. 265, in page 107, line 25, after ' Area ', insert '(a) '.

No. 266, in line 27, at end insert:
(b) so much of the employment exchange area of Aberdeen as subsisting as aforesaid as at the date of the passing of this Act was comprised—

(i) in the area of the district council of Alford or of Ellon; or
(ii) in the small burgh of Ellon.—[Mr. Roy Jenkins.]

Orders of the Day — Schedule 20

REPEALS

Amendments made: No. 65, in page 112, line 43, at end insert:


1967 c. 54
The Finance Act 1967
In section 33(3) the words from 'and" year of assessment"' to the end of the subsection.

No. 72, in page 114, line 8, at end insert:


1965 c. 25
The Finance Act 1965
In Schedule 17, paragraph 4(3), the words from ' and as regards ' to 'each of the others' as respects a distribution made after 10th April 1968.

—[Mr Roy Jenkins.]

Order for Third Reading read.— [Queen's consent on behalf of the Crown signified]

7.6 p.m.

The Chancellor of the Exchequer (Mr. Roy Jenkins): I beg to move, That the Bill be now read the Third time.
This brings us to the last stage of what has inevitably been a controversial Finance Bill. It has been so, I think, for two reasons. First, it has raised a great deal, an almost unprecedented amount, of additional revenue. Second, the Committee stage for the first time has been taken upstairs, and as a result there has been a lot of complaint from hon. and right hon. Members opposite that they have not had adequate time or an adequate audience to whom to deploy their arguments. There may have been inadequacy of deployment, I do not know, but that has not been due to lack of time.
In Committee we spent 118 hours 45 minutes net of meal breaks—more time than on any Finance Bill, save that of 1965, for 40 years—and since we have spent 39 hours on the Floor of the House on Recommittal and Report, longer than on any Finance Bill since the end of the war. If parts of the Bill have not been discussed, this I think has been by the choice of hon. Members opposite. Other parts have been discussed and re-discussed almost ad nauseam. So far as the adequacy of the audience was concerned, I could not help noticing that on most occasions more hon. Members were present in the Committee than were present on the Floor of the House.
I thought that some of the debates upstairs, particularly after the Guillotine, when we had given up discussing whether the windows should be opened or how long the dinner break should be, were of

a higher standard and reached more across party lines than those on the Floor. I do not, however, think that we arrived at the ideal arrangement this year. Largely this was because many hon. Members opposite were determined not to give the new scheme a fair trial, but I think there were other faults too. In particular I am sceptical whether the two and a half days of Recommittal—in effect another canter round the same course mostly by the same horses—proved worth while. I am more attracted by the suggestion of my hon. Friend the Member for Birmingham, Northfield (Mr. Chapman)—and I believe that the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) made a similar suggestion in the past—that we should continue to take the more technical Amendments upstairs, but that the wider issues of some general interest—the standard rate of Income Tax, the regulator Clause, and this year the aggregation of income principle, the main Purchase Tax changes, and Vehicle Excise Duty—these are obvious examples—should be taken downstairs. But that would require agreement. I hope it will be forthcoming.
I turn from how we have dealt with the Bill to its contents and its purpose. First on the contents. The object of the Bill has been to raise a very large sum of additional revenue in as fair a way as possible without impairing incentive.
The balance of the measures has, I believe, stood up reasonably well to many weeks of searching criticism. On the scope of the measures, I must confess that the attitude of the Opposition causes me some confusion. Hon. and right hon. Members opposite claim concern about the high level of consumption, although their concern, as I shall indicate later, is not, I believe, in accord with the facts. Yet the right hon. Gentleman the Member for Enfield, West (Mr. Iain Macleod), when I pressed him in Committee, said that he inclined to the view that I have done too much in the Budget. They also argued —and it is now well-worn argument on both sides—that I should have used the regulator before the Budget; yet in Committee and on Report the Opposition spoke and voted against almost every Finance Bill proposal which marched alongside what the regulator would have done. So I do not detect much consistency here.
Inevitably, in the circumstances of this Finance Bill, we have had to be very sparing in concessions in getting the Bill through its various stages, and my right hon. and hon. Friends in the Treasury, who have borne the heat and burden, not of the day but of many days and some nights, have had to give a somewhat stony-hearted impression, far removed from their true natures. But we have made a number of concessions, including a very substantial addition to the parts of Scotland in which hotels are exempt from S.E.T.
I come to the Bill as a whole, and to its main purpose. This is to give effect to the broad economic strategy of modifying the pattern of economic demand and activity so as to enable us to take full advantage of devaluation and establish a substantial and continuing balance of payments surplus. My right hon. Friend the Home Secretary began that process with the measures taken last November; the January measures to restrain the growth of public expenditure followed, and the Budget concluded the process, with massive measures to restrain private spending and notably consumer expenditure. This was by any standards a formidable—indeed, an unprecedented —combination of measures, bound in due course to produce a significant and beneficial structural change in the economy.
There has recently been expressed in some quarters some impatience in case the measures may not be working as we expected. One of the lessons we should all have learned from experience of the post-war period, and perhaps before that, is that it takes a considerable time for fiscal measures to work through and for their effects to show up in the statistical indicators. Decisions in the field of public expenditure, in particular, take a long time to affect activity unless they are of the brutal and totally uneconomic kind that stops in its tracks work already started.
But budgetary measures also take some time to work through, and the measures which I announced on 19th March—still only 15 weeks ago—are no exception. Even those that took immediate effect on Budget Day would only begin to be reflected in the indicators after several weeks, and some—notably the increase

in S.E.T.—have still to come into operation. The effects of the Budget measures are thus only now beginning to be apparent, and their impact can be expected to grow in the weeks and months to come. The same thing applies to the intensification of credit restrictions which were announced at the end of May. As the banks themselves made clear, and as I recognised at the time, they needed time to review overdraft limits and bring down outstanding advances. This could not be done in a few days.
Where then do we now stand in relation to the forecasts that I gave to the House at the time of the Budget? Hon. Members opposite now like to believe that those forecasts have all gone wrong. They also like to combine deep scepticism about all forecasts with pressing me at every Question Time not merely to rest on publishing more than any Chancellor has even done before but to publish a new forecast each month.
I take a more moderate view on both counts. But I can assure the House that on the domestic front we are broadly where we expected to be. Our latest figures suggest that consumer spending at the end of 1967 was, in fact, at a slightly higher level than we believed at the time of the Budget, but the signs are that it is coming down very much as we expected. The seasonally adjusted index of retail sales fell from 106 in the first quarter of 1968 to 102 in April and to 100 in May. Differences in the timing of the Spring Holiday in different years make the seasonal adjustment a little uncertain, but it seems reasonable to deduce that the volume of retail trade is now running at a level not very different from that in the first half of 1967, before consumers' expenditure began to expand through the second half of that year.
Instalment credit debt fell by £9 million in April and by £6 million in May, compared with the rise of £31 million in the first quarter. New credit advanced by finance houses in April and May was well down on the level for the first quarter. The available evidence suggests that new registrations of private cars are running at a much lower rate than in the first quarter, and well below the average for last year. On consumer spending, therefore, the measures have begun to bite, and the effects are beginning to show up in the indicators.


These effects should become more pronounced in the coming months as we adjust to a new level of consumer spending.
Public expenditure this year is running very close to the figures given in the January White Paper. I am keeping it closely under review, so that any corrective action which may be necessary at the margin can be taken.
We are also at least fully up to forecast with our exports. Allowing for the diminishing importance of shipments delayed by last year's strikes in the docks, the trend of exports is clearly upwards. The export order position is also encouraging: large increases in the shipbuilding and textile industries, an increase in the engineering industry, and car production for export during the three months March to May nearly two-thirds higher than in the second half of last year. The latest C.B.I. survey shows a continuing and high degree of optimism throughout export industries.
It is only in the field of imports that progress has been disappointingly slow. The June figures will not be available until next week, and in any case it is always dangerous to deduce trends from figures for a single month. But the level of imports in April and May, though a little better than the peak levels of February and March, was still a good deal higher than we allowed for in the forecasts on which the Budget was based. The visible trade deficit has thus been continuing at a high level.
We can, however, look forward with reasonable confidence to a considerably better result on the balance of payments on combined current and long-term capital account in the second quarter of 1968 than in the first, despite the high visible trade deficits for April and May. Net receipts from invisibles are keeping up reasonably well, and the long-term capital account for the second quarter will have nothing corresponding to the Shell rights issue that dominated the first quarter's figures. In addition, we may see some reduction in the outflow for portfolio investment.
The date at which we pass into balance of payments surplus must depend largely upon what happens to the visible trade balance. However, I shall not give any

forecast on that tonight. Indeed, it would be idle to do so without a clearer understanding than we can as yet have of the reasons for the continuing high level of imports, for which there is no simple or straightforward explanation, in relation to the movements of the main components of domestic demand. The recently announced French trade measures certainly will not make our task any easier, although their direct effect on us can be exaggerated: France provides under 5 per cent. of our total overseas market.
As the effects of the Budget and of the intensified credit restrictions work through, imports should fall back from the recent level, and the combination of that with the growth of exports should lead to a steady improvement in the trade balance during the remaining months of this year. This is what I expect to see.
I do not in any way under-rate the magnitude of the burdens that this Bill imposes, nor the difficulties of asking for the degree of restraint on spending and on incomes that the strategy demands. But I am clear that the strategy itself is right and necessary, and I give notice that the Government intend to continue the policies that are necessary for the attainment of the objectives at which the strategy is directed. It involves the cooperation and understanding of all of us, inside and outside the House, and the realisation that failure to adhere to the strategy would mean something a good deal more unpalatable than this Bill and the two years hard slog that I predicted a few months ago.
It would be interesting to know what easier alternative the Opposition have to offer. The right hon. Member for Bexley (Mr. Heath) has been making a few much-heralded, but sparsely reported, speeches on the economic situation recently. He expanded his views, this time without any lack of space, in the Sunday Times last weekend. But he was even thinner about specific proposals than his right hon. Friend the Member for Enfield, West has been throughout the stages of the Bill. I wish to say nothing more about the right hon. Member for Bexley, although I would like to say something more about his recent speeches on a later occasion.
I sum up by saying that the Bill gives effect to the Government's strategy, as


described in my Budget speech, as a way of distributing additional burdens equitably among the various categories of taxes and taxpayers. It also effects some significant, but not this year major, improvements in the efficiency and equity of the tax system. It has, I think, stood the test of scrutiny in the House and it is therefore with confidence that I commend it to the House.

7.21 p.m.

Mr. Higgins: We have been asked to accept the Motion that the Bill be read the Third time. I hope that my right hon. and hon. Friends will join me in the Division Lobby in opposing the Motion.
On Third reading we are concerned with what is in the Bill. It contains 57 Clauses and 20 Schedules. It is right to stress the fact that some of these have been debated under unprecedented conditions. The Committee stage was taken upstairs, and while I do not intend on this occasion to expand on the arguments against this course—they were admirably adduced by my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) in a recent article in The Times —two points should be made.
The first is that by taking the Committee stage upstairs the debates lacked tempo. [HON. MEMBERS: "NO."] I say that because we were in a congested atmosphere, which meant that there could not be the same distinction, because of the atmosphere, between debates on important topics and those which were concerned with relatively minor matters. This distinction tended to be blurred, which meant that a great deal more time was necessarily taken. This would not have occurred with the emphasis that more important matters get when they are debated on the Floor of the House.
The Chancellor said that the attendance in the House had been smaller than the attendance in Committee upstairs. I do not accept that, and I dispute his comment as one who has spent a considerable amount of time taking part in the various debates on the Bill. In any event, it would not be surprising if what he said were so, after the Committee stage had been taken upstairs. Certainly it would not be surprising on the Recommittal stage, which all must consider to have been completely abortive, since it was

not clear whether we would debate the major issues which many hon. Members were deprived from debating in Committee upstairs since they were not members of the Committee. We were, therefore, left at that stage with the crumbs which fell from the Committee's table. It is not surprising, therefore, if there was not as large an attendance in the House as one would normally expect.
Linked to this must be our consideration of hon. Members with constituency interests who would normally have put those interests forward in Committee and would then, if they felt that they had received a sympathetic reply or that they could make further progress, have pursued the matter as a natural sequence of events. It is not surprising, therefore, that on Report it was found difficult to get a reasonable debate going on some of the Clauses.

Mr. Stanley Orme: There is obviously a wide difference of opinion developing about the value of taking the Committee stage of the Finance Bill upstairs. Would not the hon. Gentleman agree that had the Bill been timetabled from the beginning all issues could have been discussed, including the special levy? I suggest that the debates which we had on many subjects were outstanding in quality and that it would have been to the benefit of the whole discussion had a different approach been taken. I therefore do not accept the hon. Gentleman's point of view on this matter.

Mr. Higgins: I cannot accept the hon. Gentleman's statement, because when the timetable came into being it was subdivided and the Guillotine fell immediately, with the result that the special charge was not debated. It often happens that when a matter is discussed one finds a flaw in the Bill which should be pursued. That cannot be done if a Measure is divided up in the way the hon. Gentleman has suggested.
It is, in any event, unfortunate that we did not have an opportunity to debate the special charge. I prepared three different speeches on that subject and I finally reached the point of feeling that I was taking part in an athletic race with a number of false starts. Eventually, there having been three false starts, I got shot in the back by the starter at the last minute. It is unfortunate that complex


matters which need to be discussed cannot be discussed because of the procedure that is adopted. That happened on this occasion and many matters were not fully discussed. On the other hand, because of the procedure adopted this year, we went over earlier parts of the Bill on a number of occasions. While they were important, other matters were not adequately discussed.
This is largely the same Bill as we were discussing on Second Reading. There have been some minor Purchase Tax changes relating to calendars and an important change, as the result of pressure brought to bear by my right hon. Friend the Member for Enfield, West, about the aggregation of minors' incomes and a concession concerning thalidomide babies. Other minor concessions have been made —about interest earned abroad and the matter which we were discussing a short while ago, the £25,000 limit—but, by and large, it is the same Bill as we were discussing on Second Reading.
It is necessary, therefore, to deal with some of the points that were made at that stage. It was implicit in some of the Chancellor's remarks that the Conservative Party would have had to do the same and that this is virtually a Conservative Finance Bill. This is not true.

Mr. Roy Jenkins: I hope that the hon. Gentleman is not crediting me with saying that either on Second Reading or on this Motion. I did not use those words, and I do not believe that what he said is the case.

Mr. Higgins: I take the right hon. Gentleman's point and I assure him that I do not wish to embarrass him unduly. When he spoke about the relationship between direct and indirect taxation he created that impression, but I accept that it was, perhaps, erroneously created.
We are told that this is the toughest Finance Bill ever. It is designed to raise £923 million. It should be stressed that this has come about as the result of the disastrous mismanagement of the economy, culminating in the devaluation of last year. [Interruption.] I appreciate that hon. Gentlemen opposite may not like listening to this. If one looks at what was said in the Third Reading debate on the Finance Act, 1967, one sees that the then Chancellor said:

The economy is moving along the course that I had in mind when I made my Budget speech.
Later he said:
If that is exuberance, heaven help me when I really throw my bonnet over the windmill. I promise the House that there really will be something to talk about then. This is the course we embarked upon. This is the course we intend to stick to. I see nothing to make me depart from what I said earlier, namely, that a 3 per cent. growth rate can be combined with a balance of payments surplus …".—[OFFICIAL REPORT, 30th June, 1967; Vol. 749, c. 1142.]
We should be given an explanation because the Bill stems directly from the mismanagement of the former Chancellor last year. The mistiming of economic measures has been the hallmark of the Labour Party since they took office in October, 1964, through every summer period since that date.
One reason why last year was so disastrous was because we did not have published forecasts which, had they been made available and had the Chancellor's assumptions been spelt out, would have enabled us to explain what might have been done in time. Public opinion would have built up by that means. I gladly agree with the present Chancellor that it is a great advance that forecasts have been published this year. That has been of great assistance and has enabled us to have more sensible debates about our economic situation. I would very much hope that nothing which has been said will in any way deter him or future Chancellors from continuing to publish forecasts, and, I hope, to publish them in more detail.
We are sceptical about forecasts, as I am sure that the Chancellor is. However, it means that we have an explicit statement tying up the various aspects of the figures, which is a great advantage. Therefore, although it is not easy to relate the day-to-day figures to those in the forecasts, because largely they are on different definitions, we are able to appraise the Bill this evening in the light of a sensibly stated set of forecasts. Even though we may have grave doubts as to whether the forecasts will turn out to be right, none the less the fact that they are set out is, I believe, a great advance in our Parliamentary procedures.
I want to ask two questions on this which are directly related to the Clauses.


The Chancellor of the Exchequer will know that the forecasts do not include any allowance for price or cost changes. He has been very reluctant indeed to say what allowance he has made in putting forward the Bill and its various Clauses with regard to incomes policy. Yet at the end of last week in a debate on prices and incomes the figures which we have been searching for so much and which the Chancellor has been so reluctant to give, came out when the Under-Secretary of State for Employment and Productivity said, regarding the incomes policy:
… I insist … that the minimum aim is not insignificant. Its outcome will, perhaps, be a reduction of effective demand of about £200 million."—[OFFICIAL REPORT, 27th June, 1968; Vol. 767, c. 895.]
If that is so, and if that is the basis on which the Bill has been constructed, it is right and proper that whoever is to reply to the debate should tell us whether the Bill is put forward on the assumption that the prices and incomes policy would reduce he aggregate demand for £200 million or whether it has not been put forward on that basis, because this is a very important point indeed and it should be clarified.
The other point upon which the Chancellor himself touched in putting the Bill and its contents in context was the whole question of what is happening to exports and imports and the level of unemployment. In this context, we certainly share the view that there is some tendency for exports to be rising; and we are glad about that. However, we have some doubts about the import position, because in his Budget statement the Chancellor said this:
… higher import prices in sterling... will tend to increase the import bill, as we have seen from the January and February trade figures But the price rise relative to home production should encourage import substitution, offsetting the rise in the volume of imports that would normally have accompanied rising demand and output; this should lead to a much reduced growth of imports in the coming months."—[OFFICIAL REPORT, 19th March, 1968; Vol. 761, c. 256.]
We are glad that the Chancellor this evening has agreed that the import performance has been disappointing, because I am sure that it is much better than the Chancellor, if events are changing as we progress through time, should say so frankly, rather than feel obliged from day to day to adhere to the view which

he originally took. This is surely the more sophisticated and more sensible way of tackling it than to say, "We must stick to our forecasts and it is a shame to attack them".
We appreciate that, as things develop, this is likely to change. Some of the expectations—for example, that of the Financial Secretary, who said on 24th April
… we shall see a declining level of unemployment over the months ahead,"— [OFFICIAL REPORT, 24th April, 1968; Vol. 763, c. 404.]
seem scarcely to have been vindicated.
The Chancellor of the Exchequer referred to the article of my right hon Friend the Leader of the Opposition which appeared in the Sunday Times. I want to quote one passage. My right hon. Friend was asked this:
Do you think that raising the question in the way which you have done"—
that is, about the economy—
may itself tend to erode confidence …?
My right hon. Friend said this:
No … Of course all these facts are widely known in Europe and North America and are openly discussed daily. It is not the discussion of these facts which can cause damage to the national position. It is the failure to face up to the facts which causes anxiety to our friends overseas.
It surely is the case that we should be failing in our duty as an Opposition if we did not look at the facts as they are produced and comment in a sensible and rational way upon them. It is the idea that it is wrong to discuss the facts which jeopardises the Government's measures, rather than anything else.
I turn now to the more detailed side of the Bill. We are certainly in a difficulty here, because, although there are lots of analogies of devaluations which were followed by no deflation and of devaluations which were followed immediately by deflation, there are very few devaluations which were followed by a delayed deflation, because normally no Government are so stupid as to adopt that course.
The point which I want to make here, because it did not seem to come out at all in what the Chancellor was saying is that it is not merely that the Government did not take action soon enough by using the regulator, and so on. The fact that the spending spree took place


means that it will be followed by a restocking spree. Therefore, the effect of the delay will last, not for three months, perhaps, but for six or seven months as regards the effect on aggregate demand.
We do not accept the Chancellor's argument that, although we said that he should use the regulator, we voted against those parts of the Purchase Tax in the Budget which were concerned with it. We were debating there, first, the increase in the number of Purchase Tax rates—the wider spread; the increased anomalies; the fact that the luxury rate at 50 per cent. had been introduced. Clearly, the only way in which we could reasonably debate this was by tabling Amendments to reduce the rates. This in no way contradicts, as the Chancellor sought to suggest tonight, our belief that action should have been taken further.
I want to return to the point which the Chancellor made just now about this not being a Conservative Budget. I am glad that he confirmed that, because I certainly do not regard it as such; and I shall spell out precisely why. In doing so, I hope that I shall make some of the alternative proposals which the Chancellor said he would like to hear. The first point which needs to be made is that the Chancellor says that he is in favour of a change from direct to indirect taxation. So are we. This is a generally accepted view. I think that it is generally accepted that a move from direct to indirect taxation is a move in the right direction— [HON. MEMBERS: "Not by everybody."] —with the exception of the Left wing of the Labour Party.
What the Chancellor has done is to increase indirect taxation without reducing direct taxation. We believe that he has been wrong, first, in changing indirect taxation in the way he has—because of the anomalies which have been created, the broadening of the rate, and so on. As my right hon. Friend the Member for Enfield, West has pointed out, we believe that the logic of the situation leads us more towards a broadly based, low-rate, value-added tax, rather than this.
Secondly, it is a basic principle of the Government that they are always concerned with the immediate revenue, without looking further forward. For ex-

ample, on the question of putting 2½ per cent. on Corporation Tax, we believe that there might well have been a stronger case for not doing that if it was desired to get an export-led boom. Exports were penalised enough at the time of devaluation by the removal of the export rebate, the imposition of the S.E.T. premium, higher import costs, higher labour costs, and so on. Then to tax all profits they made as well was, we believe, a wrong step.
A concession could have been made here and the Corporation Tax not increased. This would have meant that in the longer run the Revenue would have done better, because the export-led boom would have been more likely to have come about at an earlier stage. I believe that there is a case for moving from direct to indirect taxation. We are sorry that the Chancellor seems to us on this occasion to have done it in the wrong way as regards indirect taxation and not made any change as regards direct taxation.

Mr. Barnett: The hon. Gentleman has said that he will tell us what his policy is. He said that he would have a value-added tax to replace the Selective Employment Tax, the Corporation Tax, and all sorts of other taxes. Which items would he bring into it to make it more broadly based?

Mr. Higgins: We had discussed that matter before. I should be out of order if I attempted to go into it in this debate. It has been spelled out in speeches elsewhere. It is fairly clear what form of value-added tax is normally advocated by those who have studied this subject in any detail.
I turn from this subject to the question of Corporation Tax. I will answer directly the point which the hon. Gentleman has just made. We do not believe that the Corporation Tax as it now is is the right kind of Corporation Tax, because it discourages overseas investment and it encourages the plough-back of profits rather than the distribution of profits and a reinvestment of those profits elsewhere through the stock market into enterprises which are growing fast and which desperately need capital. That is a fundamental difference between the two parties, because, as my right hon. Friend the Leader of the Opposition


pointed out when Corporation Tax was introduced, we believe that the survival of the fattest is not likely to lead to efficient action in the economy.
Another point has radically affected the Government's view throughout the Bill. It is right that any Government should be concerned about tax avoidance, but that is a vastly different matter from becoming obsessed with tax avoidance. The Government seem determined to block completely every minor loophole, regardless of the effect which that may have either on the economic situation or on various choices which may already have been made or even regardless of humanity. I take a couple of examples. The first was admirably deployed this evening by my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin)—the retrospective change which has been made in life insurance policies. That has meant that people who, rightly, over the years anticipated a certain outcome and invested in policies for 30 or 40 years, find that, by arbitrary act of the Government, those expectations are frustrated, all in the name of closing a loophole.
A similar comment applies to the whole structure of life insurance. We shall find reduction-of-premium policies which have been in operation for many years, perhaps for a century or more, suddenly wiped out because the Government are concerned in a quite different context, not with encouraging the insurance market or enabling it to operate efficiently but simply with closing yet another loophole. We must have a due regard to avoidance, but it is important that it should not become an obsession, and it is even more important that we should weigh the cost of one against the cost of the other.
I will not digress into the whole question of the mortgage option scheme and the effect which the Budget will have on those who believed what the Government said and who opted for the option mortgage scheme. That was admirably deployed by my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke) last evening on Report.
Certainly some of these tax changes are not changes which we on this side of the House feel ought to be supported. There is a vast difference between the

two sides of the House on the question of the aggregation of an infant's income with the parent's income—as was shown in moving speeches by my right hon. Friend the Member for Enfield, West in Committee on 15th May, as reported in c. 851 of the OFFICIAL REPORT. He stressed that the Opposition Amendments were most important Amendments to the Bill, and certainly the most important Amendments to that Clause. We were given a concession on thalidomide babies, but we still have no concession in the case where—

Mr. Speaker: Order. The hon. Member may not talk about concessions which he did not get. He may talk about those which he did get.

Mr. Higgins: I am seeking to do that, Mr. Speaker. Within the Bill we still have Clause 15, which changes the law in such a way that many people who are in dire circumstances, and children in families where the main earner has died, will be penalised. There is a fundamental difference between the two parties.
That is true, too, of the special charge. We are forced to the conclusion that that was put into the Bill only because the Chancellor wished to raise the fort in a Budget and Finance Bill debate. We do not believe that it is a reasonable tactic to adopt. Next, there is Selective Employment Tax, which we on this side of the House are firmly committed to abolish. That is a fundamental difference between the two parties. We believe that the anomalies of this tax are legion. It is to be increased by 50 per cent., which will further increase these anomalies. While we are glad that some concession has been made in a few areas to particular hotels, nevertheless, we take the view that there is only one solution to this tax, which has been increased in the Bill by 50 per cent., and that is to abolish it.
As we totally disagree with all those taxes which I have mentioned, I very much hope that my right hon. and hon. Friends will join me in voting against the Finance Bill, which we believe is wrong in principle, which still includes many Clauses which will have a dire effect on a number of people and which is not an answer to our present economic situation.

7.45 p.m.

Mr. Barnett: We have had some differences of opinion between the two sides of the House whether the Bill should have been debated upstairs in Standing Committee or on the Floor of the House. A great deal of humbug has been spoken and written on the subject. We all know that it is open to an Opposition to frustrate any Bill, including a Finance Bill, whether it is debated upstairs in Committee or downstairs on the Floor of the House. By so frustrating the Bill, it is possible for them to ensure that the House has no debate on a number of Clauses, and it was possible on this occasion for them to see that the House had no debate on the special charge, other than the start of a debate on it this evening.
The Opposition made it clear from the beginning of the Bill that they had no intention of co-operating in the way in which the Finance Bill should go through the House. It is a little hypocritical for them now to argue that we lost an opportunity to debate many Clauses. I do not argue that the Opposition have deliberately filibustered. As hon. Members know, it is not necessary to do that. One could take any Finance Bill—not only this year's rather long Bill—and debate a quarter of it for the whole of a year. It is quite simple to do that. But, as we all know, normally the Government and the Opposition join in restraining back-bench Members—that is a normal practice—so that we have a reasonable discussion on all Clauses of the Bill. That did not happen this year, and some Clauses were not debated.
I know that the right hon. Member for Enfield, West (Mr. Iain Macleod) believes that it is impossible to restrain back-bench Members when we are in Committee upstairs. I respect his view and I know that he genuinely holds it. It is not strictly correct. I recollect that when we were in Committee there was an occasion on which the Parliamentary Secretary to the Ministry of Transport was reading rapidly from a brief and back-bench Members opposite were clearly dying to get into the debate. They were restrained and held on a leash, presumably by instruction.
Of course I recognise that the right hon. Member or anyone else leading an Op-

position team in Committee upstairs would find it difficult to restrain backbench Members when everybody is present in Committee to debate a particular Clause. Leadership is not easy. But it needs to be exercised, and it was not exercised on this occasion—and that was not because of lack of ability, because, clearly, the right hon. Gentleman has the ability. It was because of a genuine constitutional desire to frustrate the will of the Government. That is fair enough. Those are legitimate tactics. But that does not represent an argument against debating the Bill upstairs in Committee rather than on the Floor of the House, because the same tactics could be deployed downstairs on the Floor of the House as in Standing Committee.
I believe that the idea of taking out the non-controversial Clauses and debating only those Clauses upstairs is a non-starter, and I am sorry that my right hon. Friend the Chancellor appeared to agree with it. If one looks through the 57 Clauses of this Bill, one sees that very few of them are non-controversial —perhaps other than Clause 57, the Title, or the Clause dealing with Premium Bonds, although to some hon. Members, that, too, would be controversial. I do not think that I could support my right hon. Friend's proposal in that respect.
We could, however, have a Select Committee on taxation after the Finance Bill had been passed and discuss Clauses which had been passed by the House and such provisions as those dealing with close companies affecting life insurance, certain personal allowances and so on. We could have a Select Committee on taxation. But I do not believe that splitting the Bill is an option, nor do I believe that we should attempt to do it. The tactics of the Opposition this year did not prove that we should not have the Bill upstairs. They simply proved, if proof were needed, that the price of an Opposition's using their democratic rights to the full is an inefficient Parliamentary system. It is a price that I think and hope we are all willing to pay, but it is a pity that the genuine interests of the taxpayers tend to get lost at the same time.
I hope that the Government will not give in to these tactics, and that my right


hon. Friend the Chancellor will reconsider what he said at the start of this debate. With a timetable from the start, whether voluntary or otherwise; with more time upstairs in Committee, by using the time allocated to the Recommittal stage, which this year was a waste of time; and with better co-operation; the debates could be much more useful. I should have thought that Opposition hon. Members would have learned from last night how impossible it was to have a serious debate on an important Clause when, for example, the hon. and gallant Member for Knutsford (Sir W. Bromley-Davenport) joined in what should have been a serious debate. But it was a politically controversial Clause, and it is very difficult to debate such a Clause seriously on the Floor of the House.

Mr. Julian Ridsdale: Does the hon. Gentleman really want to debar people like myself from taking part in the Committee stage just because we have not been selected, when we have very important constituency points to make?

Mr. Barnett: I would not want to debar the hon. Gentleman from anything. I was discussing whether the House should decide to hold its debates on the Finance Bill upstairs or downstairs. There are opportunities to debate it fully if we take it upstairs, and we can debate it there more seriously and properly. As I said in a letter to The Times in reply to the article by the right hon. Member for Enfield, West, when we returned to the Floor we saw a very much smaller number of hon. Members present to debate it. The reply of the hon. Member for Worthing (Mr. Higgins) on that point was not valid.
We are now on Third Reading of a Bill which takes an extra £923 million out of the economy, yet we already hear talk that that is not enough. There is already a July madness with us again. I understand that in the rainy months the worms come up. July seems to be the month for Jeremiahs, and they are in full spate again this year, talking us into a crisis if they possibly can. I hope that my right hon. Friend the Chancellor will ignore the Jeremiahs. I agree with Peter Jay, who said in The Times this

morning that the success of devaluation cannot be judged
… less than eight months after the event from a motley collage of more or less outdated balance-of-payments statistics, notoriously inaccurate output data and speculation.
If devaluation and the associated flanking measures are going to succeed in producing the necessary continuing balance-of-payments surplus of £300–500m. per year, it will do so over 18 months to two years. Nothing could be more hazardous for professional reputations or for the determined prosecution of the strategy than attempts to predict and monitor exact progress towards this goal month by month.
The trouble is that there has been a great deal of confusion between economic and financial problems. It needs to be said that those who complain that the Finance Bill and the Budget strategy have still left the pound under such pressure as to need a second devaluation—and there are people saying this—are either ignorant or, much worse, evil-minded enough to be prepared to talk us into a crisis for political reasons. Fortunately, this tactic cannot work, for those who matter know that a second devaluation solves nothing and is simply not a proposition. The pressure on the pound has nothing to do with the Budget strategy and the Finance Bill, but with the sterling balances and the world monetary problems. There is nothing in the Finance Bill that deals with them, but if the result of the false crisis that we are in danger of talking ourselves into is that we talk ourselves and others into doing something about the sterling balances and the capital outflow, I for one shall be satisfied that we are getting something out of it.
I do not agree with the hon. Member for Worthing, who seemed to suggest that a Conservative Government would encourage capital outflow by reversing the method of dealing with it in the Corporation Tax. I cannot understand how he can suggest that we can do that this year or in the next year or two, even if in principle the idea is one which could be carried out.
The really serious figures recently— and here I agree with the hon. Gentleman —have been those for imports. It is true that so far the Budget strategy has had little effect on the level of imports, but the trend of retail sales at last appears to be encouraging. One should in this context recall that the National Institute


of Economic and Social Research, despite its pessimism about the import figures, predicted a £300 million to £400 million surplus in 1969. We should all like a £500 million surplus and more. But it is crazy to talk of a crisis through a shortfall in surplus of £100 million to £200 million when seen in the perspective of the forecast for 1968 of total exports and imports, including invisibles, of over £17,000 million. Yet, to deal with this, we are told in many quarters that we need another mini-Finance Bill or a July package of deflation. This is simply not proved to be necessary in the context of any of the figures that have been brought to our notice, whether by the National Institute or anybody else. It would be disastrous to bring forward deflationary measures of such a description when unemployment is already at a higher level than many of us would like to see.

Mr. Iain Macleod: I am not at all sure which windmills the hon. Gentleman is tilting at. Neither my right hon. Friends nor I, nor, as far as I know, anyone on this side of the House, has suggested, of all things, that we need a deflationary package for a second time. There may be voices saying this, but they do not include Her Majesty's Opposition.

Mr. Barnett: Her Majesty's Opposition have only complained about the high level of imports, and have not said how they would deal with them. [Interruption.] If the hon. Gentleman who is tut-tutting wants to speak, let him do so.

Sir D. Glover: Her Majesty's Government also complain about the level of imports, and have also said nothing about what they will do about it.

Mr. Barnett: Her Majesty's Government have said that the level of imports, although higher than originally forecast, will still leave us with a trend which they are satisfied will give us a substantial surplus in 1969, and it seems to me that all the figures should satisfy us that that is so. Right hon. and hon. Members opposite have implied that the position is rather more serious, and yet they have not suggested how they would deal with it. That is my only point. I am not suggesting that the right hon. Gentleman was the windmill at which I was tilting.

As he knows, there have been many articles by informed observers suggesting that such action might be needed.
If that is the price that my right hon. Friend is being asked to pay in order to do something about the sterling balances, I hope that he will be under no illusion not only that he should not accept it but that he cannot accept it, because I do not think that he could get it through the House. Fortunately, however, the central bankers see the problem somewhat differently from some in the House and some in the City. They know that in their interests as well as ours the Finance Bill and Budget strategy must be given time. I hope that we shall proceed in that direction now by giving the Bill a Third Reading.

7.59 p.m.

Sir Fitzroy Maclean: I hope that the hon. Member for Heywood and Royton (Mr. Barnett) will forgive me if I do not follow him into the realms of high finance. I want briefly to register the strongest possible protest against what I think is about the most extraordinary feature of the Bill-namely, its savage and apparently deliberate discrimination against the hoteliers of North Ayrshire, in my constituency, by inflicting on them a 50 per cent. increase in Selective Employment Tax while exempting their immediate neighbours and about all the other comparable hoteliers in Scotland from the tax.
Incidentally it is disgraceful that once again there should be no Scottish Minister on the Government Front Bench when this sort of thing is being done to Scotland. This is not the first time that this has happened. It happens again and again. I commented on it when I spoke on the same subject on Second Reading.
Having vigorously opposed this iniquitous tax ever since it was introduced and constantly drawn attention to its deplorable impact on Scotland as a whole and particularly on the Scottish tourist industry, it would not make any sense for me to object to such action as the Government have taken, under pressure from my right hon. and hon. Friends and myself, to mitigate its effects. But by making as many exemptions as they have done—belatedly, but better late than never—they have by contrast greatly


sharpened the effect and increased the unfairness; of the blow that they are dealing at the relatively few hoteliers outside the big cities and the industrial belt who are still to be penalised. These, for reasons which are totally incomprehensible to me, include those of all the famous Clyde tourist resorts of the North Ayrshire coast in my constituency. These are now to be penalised and hit harder than ever, while their neighbours, and, incidentally, their competitors, operating under identical circumstances hardly any distance away, are to be exempted altogether from S.E.T.
When I asked the Minister of State for Scotland to explain this yesterday all he could say in reply to my Question was that
refunds are not being made in areas catering primarily for day trippers."—[OFFICIAL REPORT, 3rd July, 1968; Vol. 767, c. 1493.]
This is absolute nonsense, and he knows it, and the Secretary of State also knows it. The Minister of State has actually contested my constituency, and if he did his job as a candidate properly he ought to have found out something about the tourist industry there. Again the Secretary of State is a neighbour in Ayrshire, and he, too, ought to know something about the rest of Ayrshire.
Skelmorlie, Largs, Fairlie, West Kilbride, Seamill, Ardrossan, Saltcoats and Stevenson do not cater primarily for day trippers. Largs, to take just one example, has a number of well-equipped hotels that cater for visitors from all over the world, who for the most part stay for a week or two, and some much longer, to enjoy its salubrious air and other amenities. The same can be said of a number of the other resorts that I have mentioned. They do this in exactly the same way as do the other Clyde resorts which have been exempted. Indeed, many of the other Clyde resorts—no names no pack drill—could with far more justice be described as catering for day trippers than, for example, Largs, Skelmorlie or Ardrossan.
When I spoke on Second Reading I said that the hoteliers of North Ayrshire were seething with indignation at the treatment meted out to them. At that time, three months ago, they had a great many more companions in misfortune than they do now. Now they have been singled out from all the resort hoteliers

in Scotland for special punishment. Now that this has happened, to say that they are seething with indignation is no longer, I can assure the right hon. Gentleman, an adequate description of their frame of mind.
Three months ago, in April, the Scotsman headed its leading article on this subject: "Incompetent or mad?" This question has now been answered. We have long known that the present Government are incompetent, but I believe that to include such a provision as this in the Finance Bill they really must be stark, staring mad.

8.6 p.m.

Mr. Robert Sheldon: I am very pleased to hear that my right hon. Friend the Chancellor of the Exchequer does not intend to give up the experiment of having the Committee stage of the Finance Bill upstairs. Although he pointed out one or two possible variations of this, perhaps those variations need some consideration.
In particular, I should have no objection to having the "Clause stand part" debate on some of the main issues taken on the Floor of the House where other hon. Members could take part. But all the Amendments, even to the big issues like Corporation Tax, Selective Employment Tax and Income Tax, should still go upstairs. This might be a way for hon. Members to take part in the Committee stage on the Floor of the House and for a better examination of the Bill upstairs.
I believe that we had very much better debates following the introduction of the Guillotine than any I can recall on previous Finance Bills. We had informed discussions mainly because the hon. Members who were there stayed there. Although one likes to give an opportunity to a number of hon. Members to take part in a debate, few can deny that when we have hon. Members just coming in, finding the place a little empty, speaking a little and then going out, it leads to a very confused debate, and it does not give the Clauses of the Bill the close examination that all of us want to see.
The problem that we had upstairs, as my hon. Friend the Member for Heywood and Royton (Mr. Barnett) pointed out, was caused by the attitude of the right


hon. Member for Enfield, West (Mr. Iain Macleod). He opted out of control, and this was the reason why we had the protracted debates and why we did not discuss certain important Amendments which I was very sorry were not brought before the Committee despite the amount of time allowed for the Committee stage.
We know that there are the rights of the Opposition. A bargain is usually struck between the rights of the Opposition to control the length of their speeches in return for certain concessions given by the Treasury Bench. On this occasion, that kind of agreement was not made, and it is a pity that the Bill was not discussed as well as many of us would have liked. Perhaps next year or, more likely, the year after, we shall get the kind of informed discussion on the Bill that I should like to see.
In the meantime, I should like to add my voice to those that are growing in asking for some form of Select Committee to discuss certain matters which are not readily discussed by the making of speeches. The eliciting of information on certain technical matters is an extremely difficult thing to achieve by means of speeches and replies from the Treasury Bench. What we need is some session where questions can be put and answers can be obtained.
One of the main purposes of the Bill in connection with the raising of this large sum of money is to reduce consumption. We know that this is becoming harder to achieve each year as people become innured to appeals of this kind. In 1957, it was a relatively easy thing to achieve. In 1962, it was still fairly easy. But when we came to 1964 and up to 1968, it had become progressively hard as one preached difficult times ahead and people who had heard it so often before took less notice.
This is one of the great problems which my right hon. Friend the Chancellor of the Exchequer had to face. He was very realistic, and he decided to make sure once and for all that he had to take a certain amount of money out of the economy, and that even if it were too large at least he would err on the right side. This was of as immense importance as an attempt to end the days of hard talk about the future not being seriously believed. The import figures

are still high and we may need to consider import quotas in due course, but this is a matter which I prefer to leave to the judgment of my right hon. Friend, although I hope that any action he may take will not be too late, as it has been so often in the past.
I wish to put two complaints to the Treasury Bench. The first concerns the lack of an explanatory memorandum. I put a Question to my hon. Friend the Financial Secretary on 25th June. I received a written reply pointing out that there were difficulties but that he was sympathetic to the general idea and that he would consider it carefully. I accept that he has a genuine desire to clarify and simplify taxation matters and even to reduce the burden of taxation; those who have been with him through the various stages of the Bill will accept that. But we know that such a memorandum exists. We cannot believe that those who go on to the Treasury Bench in a position of ignorance rapidly acquire a large amount of knowledge overnight. They are instructed in a very detailed way. If a memorandum, brief, or whatever it might be, were available to them, I should have thought that it was relatively easy to condense it and make it available to hon. Members. It should set out not the arguments so much as an explanation of how the Clauses are intended to work and what they mean.
I should have thought that this was well within the capability of the Treasury Bench. There is a precedent for it. There was a most valuable memorandum on the 1965 Finance Bill which was available not only to hon. Members but to the public. This was an excellent precedent and I am sorry that it was not followed in subsequent Finance Bills. We should ask the Treasury to make sure that when next year's Finance Bill is discussed we have an explanatory memorandum, which would be of value in our debates.
My second complaint, which is more serious, concerns the investigation by the Treasury of certain matters of fact and certain things which it can discover and which will be of great help to it in forming its tax proposals. This relates to the call which I made for research into some of the incentive and disincentive effects under which the Government operate. I do not believe that a call for research is any excuse for inaction. Decisions must


be based on evidence, and if there is no evidence available, although the Government might try to obtain it, they must operate within the limits of what is already known. This I accept and understand. But, given the possibility of obtaining further information on which they can base their decisions, there is no excuse for further inaction.
I feel that this matter is particularly important, because this Bill introduced a fundamental change in direction. In the Budget statement, my right hon. Friend said—this has been quoted before but it is worth remembering—
No earned income, save for the effects of the recoveries of family allowances, the principle of which had already been announced, will therefore be subject to higher direct taxation. This I believe to be justified on the ground of incentive."—[OFFICIAL REPORT, 19th March, 1968; Vol. 761, c. 296.]
This was a fundamental change in the attitude of Chancellors of the Exchequer, at least from this Party. It was an accepance in principle of the disincentive argument of direct taxation. I should have thought that, with the Chancellor of the Exchequer accepting that £4,600 million was the limit that could be raised out of Income Tax and Surtax, some evidence of this attitude should be called for.
I do not blame the Chancellor of the Exchequer for coming to a situation in which the evidence was not available, but I believe that this omission should be put right. He decided that there was a level beyond which the disincentive effect of taxation would produce a rapid falling off of effort. I think that most of us know that such a situation exists, but we are all completely ignorant about just where it exists. In other fields, the Government are spending large sums of money—£100 million a year on the Regional Employment Premium, £250 million on investment grants, and a large sum on the Selective Employment Tax refund. This money is being spent to persuade people to do things which they would not otherwise do. If we are to persuade them to do them by offering large sums of money, we should at least spend a little money to see whether they are doing what we are trying to induce them to do.
The Government are raising £12,000 million a year. We on this side of the House now openly accept that there is a disincentive effect in a large part of that,

and I should have thought that the least we could do was to spend a little money to discover something about the disincentive effect and how it might be reduced and what advantage, if any, might be taken of it or how the disadvantage could be diminished.
The Financial Secretary scorned such investigations as matters of opinion. But informed opinion is what we all want. In discussing the question of research or investigation, the Financial Secretary said on 19th June:
We will merely get an expression of opinion rather than the ascertainment of fact, or we will get the kind of elaborate sociological investigation of the type that was conducted in the medical world into the effect of mother love on children. In that case, after several years of intensive research, those conducting it burst upon the world with the assertion that it is scientifically proved that children benefit from mother love.
This kind of scorn and attitude is totally outdated. There are methods available and it is shameful that the Treasury Bench did not know about them or did not even understand them. My hon. Friend mentioned in passing that universities might undertake this sort of work if it were profitable, and he went on to say:
However, it appears that these university and other institutions have not thought fit to pursue this line of inquiry."—[OFFICIAL REPORT, 19th June, 1968; Vol. 766, c. 1160–1.]
I must disillusion the Treasury Bench. The National Institute is carrying out work of this kind, but obviously it is not nearly so well fitted to do it as the Treasury, which is directly involved. Perhaps not everybody unqualifiedly admires the Treasury today. It is able to ignore the revolution in the universities and say that it does not matter, to consider any new field of understanding and call it irrelevant. In these circumstances, one can be forgiven for assuming that its conceit and effortless superiority is a little less convincing now than it used to be.
Perhaps the matter can be summed up by the Balliol undergraduates, who have a certain sympathetic feeling with the Treasury. I should like to quote a verse which I am sure is well known to many hon. Members:
First come I; my name is Jowett.
There's no knowledge but I know it.
I am Master of this college:
What I don't know isn't knowledge.
In this respect, it sums up the attitude of the Treasury. The scornful remarks


made by the Treasury on what can be achieved in this area confirm my worst suspicions of closed minds and narrow attitudes which, perhaps, are responsible for so much that is wrong in our society today.

Mr. John Biffen: Who was the author of the scornful remarks which the hon. Member has quoted? Which particular intellectual on the Treasury Bench was it who spoke the words to which he rightly takes exception?

Mr. Sheldon: I was quoting from the Financial Secretary to the Treasury.

Mr. Biffen: Not the Chancellor?

Mr. Sheldon: No. I must be forgiven if I am showing rather greater anger than is customary in these matters, but I feel strongly that in an area in which the ordinary private firm spends vast sums of money discussing attitudes on matters in which the control is not complete, it is reasonable to assume that the Treasury could spend a small amount in comparison with the very large amounts that it raises.
I fully understand the normally civilised behaviour of my hon. Friend the Financial Secretary. I hope that he will reflect on how easily he has accepted the Treasury line and I hope that he will consult his own inclinations which, I am sure, would be much more progressive than what he has stated up to now.
That was a particular "beef" which I had to get off my chest. Having suffered in Committee and having seen what I felt to be a sensible solution scorned in that way, I passed a note to the Financial Secretary, who, unfortunately, could not be here today. There is nothing personal in this. In fact, I did expect to have support from my hon. Friend, because I believe that on these matters he is prepared to be far more adventurous than most Financial Secretaries have been in the past. We have seen this in Committee and elsewhere.
One aspect of the Finance Bill to which I would like to refer is the change of tax philosophy. This covers the change of emphasis from direct taxation to indirect taxation. This was shown in both Purchase Tax and the Selective Employment Tax. There was, as we know, a large

increase in the revenue from these taxes. When we try to get large increases, we get a large number of anomalies. We get the great difficulty of judging what are luxuries and what are not. We get distortion of choice and, what is perhaps most invidious, we have the position that people have to judge what should be at the higher rate, what should be at the lower rate, what is right to carry a high taxation rate and what is wrong to carry a high taxation rate.
With the rates of Purchase Tax at a low level, the anomalies are relatively easy to bear. With high rates of the tax, we have instances like that of gramophone records, on which we had heated discussions, and the problems which come from categorisation and categorisation coupled with high rates of Purchase Tax.
One thing which I have learned as a result of the Bill is that this essentially is the dilemma of the Opposition. It is they who wish to increase indirect taxes. I find it very unconvincing when they assume that they will get all the benefits of broadening the tax base and all the benefits of a low rate at the same time. If they are to increase the revenue from indirect taxes, what is it to be? Is it all to be at the one rate? Will there not be any exemptions for food? Are the rates of tax for clothing and motor cars to be the same as for furs? That is the problem of the Opposition.
One of the difficulties is that we are essentially a very fair community. This is what raises the problem of Purchase Tax.

Sir C. Osborne: The hon. Member is throwing the blame on to this side of the House as though we were responsible for the Bill. It is his Government's Bill.

Mr. Sheldon: The hon. Member ought to know that it is the policy of his right hon. and hon. Friends to increase the amount of revenue obtained in this way. If they were to increase the amount of revenue, they would run into much greater problems than those which they have criticised continuously throughout the Committee stage.

Sir C. Osborne: Surely, we are discussing the Bill—the Government's Bill —and nothing else. That is where the hon. Member should be directing his attention.

Mr. Sheldon: Certainly we are discussing the Bill. I am discussing the attitude of the Opposition towards the Bill and their remedies, which I see as no remedy but as increasing the difficulties which the party opposite would find if ever they were to implement their ill-thought-out schemes.

Mr. Ridsdale: Does not the hon. Member realise that the one thing about the Opposition which differs so much from the Government is that they do not hold an anti-capitalist view?

Mr. Sheldon: We are well used to the hon. Member's irrelevancies by now.
Our tradition of fairness is one of the great stumbling blocks to a simplified structure. We all feel it indefensible that food should be taxed. We are, therefore, unable to introduce some of the simplified schemes of other countries, because what happens in this House is that hon. Members confronted with an unfair situation try to correct it When we have these instances of unfairness, we are unwilling to ride roughshod over them. Consequently, we get more Amendments to an already complicated Bill and complication grows upon complication to introduce and develop the fairness which we feel to be inherently right. As a result, Finance Bills become too large. This, however, mitigates against the simplified solution.
It is the simplified solution that hon. Members opposite are trying to develop when they call for a broadly-based, simple structure of value-added tax. As soon as they get into the situation of trying to implement that tax, they will see that it is nothing of the sort. They will end up with far greater complexities than anything they have dreamed of and of having to collect more money from the little shop-keepers around the corner who are taking in a few £s a week.

Sir C. Osborne: To which Clause of the Bill is the hon. Member referring?

Mr. Sheldon: One of the problems that we have had in the Purchase Tax discussions on the Finance Bill is that the tax base has not been wide enough. Therefore, we have had to have very high rates and we have had to have differential rates much greater than any of us would like to see. Because of this we have had

an increase in anomalies, which always arise when one tries to move from direct to indirect taxation and, at the same time, to take rather more in revenue from these forms of taxation.
When hon. Members Opposite criticise both the Selective Employment Tax and Purchase Tax, they should remember that what they are criticising is indirect taxation. The very criticism which they make will be needed to be directed even more to their own schemes than to the Government's. From the Measures that we have taken this year one lesson that Socialist governments will have to learn is that to remedy injustices requires large sums of money.

Sir D. Glover: The hon. Gentleman has devoted about two-thirds of his speech to what the Conservative Party should do when in power. Can we take it, therefore, that he expects the Conservatives to win the next election?

Mr. Sheldon: I do not know what precise proportion of my speech I have devoted towards demolishing the arguments of hon. Gentlemen opposite. Perhaps some of my anger about the ill-thought-out arguments of hon. Gentlemen opposite, both in Committee and in the House, has finally surfaced this evening.
The lesson that I see all Socialist governments will to face is that to remedy injustices costs a considerable amount of money. This is so, as we have seen this year. With the urge both to raise money and to redistribute it, we will find ourselves faced with incompatible ends, because redistribution, as we are finally coming to realise, is not enough. For this purpose there are not enough wealthy people whom one can tax to give to those who are more deserving. Therefore, what one does in effect, if one believes in a policy of redistribution, as I do, is to take from those whose incomes are above average to give to those who need it rather more. When one goes to those who are above average, we go not only to Labour supporters, but to the broad mass of the people, who, at a time when wealth is not increasing rapidly, object violently both at the ballot box and elsewhere. We need to increase wealth and so increase the proportion of that extra wealth for redistribution. The


first requisite of a Socialist Government, and the main task of my right hon. Friend, is to create wealth, not only for the good of the country, but also for the Socialist purposes in which we believe. I think that the action taken by my right hon. Friend will contribute to this end.

8.32 p.m.

Mr. Richard Wainwright: I warmly support the eloquent plea of the hon. Member for Ashton-under-Lyne (Mr. Sheldon) that the Government should reverse their hitherto narrow and, at times, flippant attitude towards the need for scientific examination of the effects of taxation.
I referred in Committee to a publication of Political and Economic Planning, which it was suggested might be of use to the late Conservative Administration if they had wished to use it, called "Tax Surveys—Can they help?" The resounding conclusion of that work is that tax surveys have helped in many industrial countries and ought to be widely adopted here.
When one reflects on the vast amount of money which, for instance, is spent in the realm of psychological medicine trying to trace the response of a comparatively small number of people to certain stresses and strains, it is fantastic that, on a matter affecting the vast body of citizens, so little careful research is done.
The Liberals cannot possibly support a Bill, quite apart from its other demerits, of which so many controversial Clauses have not been debated at all and of which other Clauses have not been adequately debated on a proper representative basis. It is no concern of mine how blame should be apportioned between the Guillotine and the obedient silence of Government Members on the Standing Committee, on the one hand, and the extraordinary preoccupation of hon. Members on the Conservative side of the Committee with meal breaks and the exact degree of ventilation. Between the two they have ensured that large important sections of the Bill have not been debated.

Mr. Eric S. Heffer: That is strange logic. On the one side, the hon. Gentleman mentions my hon. Friends being obedient and not saying anything and, on the other side, hon.

Members opposite speaking on all kinds of subjects. The blame can hardly lie with my hon. Friends who are obedient and say nothing on the Bill.

Mr. Wainwright: Silence is not an effective way of securing adequate debate. That was the point, along with the use of the Guillotine, that I was making, I hoped, to the satisfaction of other hon. Members.
I was glad that the hon. Member for Heywood and Royton (Mr. Barnett) and the hon. Member for Ashton-under-Lyne were quick to indicate their disapproval of the Chancellor's suggestion this afternoon that perhaps in future so-called technical matters could be sent upstairs. This is an impossible distinction to draw, particularly because a Finance Bill usually covers at least five—sometimes more—quite separate specialities.
This year, for instance, a technical committee would have needed specialists on alcohol, on gambling, on life assurance, on Income Tax, on probate and Estate Duty matters, and on special taxes on employment. The idea that any one group of technical specialists can cover all the expertise required for a Finance Bill within the numbers on a Standing Committee is, I think, a delusion. On the other hand, if we could have pre-legislation committees, as has long been the custom in the United States, we could get somewhere in our treatment of tax legislation.
I was surprised to hear the Chancellor explain that there had not yet been time for his Budget and this Bill to have any effect. He spoke of further time being needed for the effects of the Bill to work through. This seems to be almost an admission of incapacity, because for years it has been acknowledged that part of the main craft of constructing a Budget and a Finance Bill is to give immediate signals to which industry and indeed consumers will respond.
We are generations away from the time when people did not take note of taxation changes until they received a demand from the collector. There is no reason why a carefully constructed Budget should not have a drastic and immediate effect on the economy because of the signals it contains, and which most of the financial journals have antennae ready to detect.
The truth is that the signals were confused and misleading. In particular, there was inadequate incentive in the Budget and in the Bill to get import substitution under way quickly enough in the way that it could have been done, and in some other industrial countries has been done brilliantly.
Dealing with unemployment, during the Second Reading debate the Financial Secretary predicted:
… we shall see a declining level of unemployment over the months ahead."— [OFFICIAL REPORT, 24th April, 1968; Vol. 763, c. 404.]
We are still waiting for his prophecy even to begin to be fulfilled. A Finance Bill which sent out encouraging signals to the industrial community could have made his prophecy come true.
The fact is that the balance between the different kinds of taxation in the Bill has been proved wrong. When talking about balance, I do not make quite the same hard and fast distinctions as the hon. Member for Worthing (Mr. Higgins) seemed to do between direct and so-called indirect taxation. I hope that we are moving away from that rather Edwardian distinction, because when we talk, for instance, of a value-added tax, we are talking of a tax which falls partly on profits, and therefore in the old-fashioned language is direct, and partly on costs, and is therefore indirect. I believe that if the Chancellor, in the way he spelled out the family aggregation principle, had spelled out provisions, for value-added tax to be introduced in the future, even though there was not time for it to be introduced in the current fiscal year, this would have been a useful signal to the industrial community.

Mr. Sheldon: The hon. Gentleman said that the value-added tax was partly a tax on profits. Is it any more a tax on profits than is Purchase Tax?

Mr. Wainwright: Yes, because the payer of Purchase Tax may be making no profits. Someone who is running his business at a loss may be paying as much Purchase Tax as is paid by a profitable wholesaler.
The second feature in which there is a lack of balance in the Bill is the distribution of burden between different parts of our fiscal machinery. It is extraordinary that in this year, with all

the symptoms manifest in the spring of a gross overburdening of the Inland Revenue machinery, almost the whole weight of the Bill's innovations are falling upon the Inland Revenue and on those on the taxpayers' side who are opposite the Inland Revenue, whereas Customs and Excise, which has had a relatively easy time in recent years, has been given practically no innovations to introduce.
A value-added tax would have been a splendid and appropriate job for the Customs and Excise branch, which, we are assured, is in very much better trim to take on substantial innovations than is the Inland Revenue.

Mr. Deputy Speaker (Mr. Sydney Irving): Order. The Chair has given considerable latitude in this debate. I hope that the hon. Member will not continue to refer to the value-added tax, because it is not in the Bill. It has been referred to, but I hope that the hon. Member will not proceed to discuss it further.

Mr. Wainwright: I defer to your Ruling, Mr. Deputy Speaker. I have only one other matter to which I wish to refer, and this time I do so in thoroughly complimentary terms. The spread of S.E.T. concessions to the hotel industry is welcome to my hon. Friends not only for itself but in one case for the remarkable last-minute elasticity which it shows in the Government's administration of the tax. It is not so long ago that we were told that S.E.T. was inevitably tied to precise employment exchange areas, but in the case of part of West Aberdeenshire the House agreed to an Amendment this afternoon which was a notable step forward in more elastic administration. I mention this partly to encourage hon. Members to realise that a little pressure can introduce elasticity into administrative arrangements.

Mr. Higgins: But does not the hon. Member regard it as appalling that whether or not a firm makes a profit depends on pressure of this kind? Is not the only solution the abolition of the tax?

Mr. Wainwright: The hon. Member knows that in this respect the Liberal and Conservative Parties are at one. Whether we are at one in our alternative proposals is a matter into which I should


not be in order in entering now. On the point made by the hon. Member, however, I entirely agree.
At long last the Government have been able to detach themselves from the idea of employment exchange areas in toto, and in this case they are actually prepared to extend their concession to so much of an employment exchange area as, at the date of the passing of this Act, comprises the area of a district council or a small burgh. This is at least some advance compared with the previous restrictive attitude.
For the reasons which I have enumerated, I shall feel bound to ask my hon. and right hon. Friends to vote against the Bill tonight.

8.45 p.m.

Mr. R. B. Cant: My right hon. Friend the Chancellor of the Exchequer has had an extremely difficult job. I may be unpopular in saying this, but I want to put it on record that, in my view, his difficulties stem, in part, from the fact of devaluation itself. Most hon. Members —in fact, most intelligent commentators and most of the people—have embraced devaluation as a rather unpalatable solution to our problems. But in retrospect, we shall, I think, find that my right hon. Friend's difficulties stemmed from the fact that he or his predecessor created a situation in which the problem associated with the need to increase exports has thrown considerable tax burdens on the economy. Many of the so-called effects of devaluation in the field of surging exports arise not so much from the price elasticities introduced into the equation by devaluation but rather from the income effect of expanding world trade.
Our experience in 1968 is similar to that in 1950—that expansion is the consequence not of the reductions in prices, but of this expansion of world trade, similar to that associated with the Korean War. Because of this, my right hon. Friend had a difficult Budget to draw up.
His difficulties have been increased because we are slowly but irrevocably coming to the conclusion that the whole problem of demand management in late 1960s is becoming exceedingly difficult. Much of the relevant literature, including

the interesting article in Lloyd's Bank Review and a much more learned one in the current Review of Economic Statistics, shows that Chancellors today, in using the Budget for the management of demand in the economy, face problems which make the use of this economic weapon almost outmoded. I must not go into this too deeply, but we should reflect on whether this is enough.
I will make a slight concession to hon. Members opposite by saying that, if we asked ourselves why demand managements by fiscal means is getting more and more ineffective, we would realise that we are not using these techniques in the context appropriate to their success. The whole problem of the growth of liquidity is becoming extremely serious. There is an enormous paradox in that, as world trade rises, the increase in the money needed to finance it rises much more slowly. Yet, domestically, the growth of money is disproportionately larger than the growth of the gross national product which it is financing. I ask my right hon. Friend to ponder that thought.
He had a difficult problem as a consequence of devaluation and the growing ineffectiveness of his contemporary economic tools, but I still feel that the Budget is the right one in global terms and in the balance of taxation which he has chosen. I have not changed my mind about the Budget. When I heard it and took part in the discussions, and listened to the euphoric reaction which was in evidence on this side of the House, I thought that the Budget was about right.
I agree entirely with my hon. Friend the Member for Heywood and Royton (Mr. Barnett) that July is a peculiar month and that Peter Jay, the very eloquent and well-informed young economics correspondent of The Times, has done the country a great service. Earlier, in some of his articles relating to the gold rush and what might happen, he was on rather shaky ground, but this morning he did this country a service, and my hon. Friend the Member for Heywood and Royton was right to bring to the attention of the House some of the sentiments which he expressed.
If the Chancellor had difficulties in framing his Budget, he will certainly have difficulties in the months ahead. He will be squeezed between the upper


and nether millstones—between those who, whatever was said by the right hon. Member for Enfield, West (Mr. Iain Macleod), will ask for more deflation as imports begin to grow, for that is a school of thought in this country, and those of my hon. Friends below the gangway who will plead with him, as unemployment rises, that he should reflate. He may have had problems when he formulated the Budget. He will have other problems in the future.
As a contribution, perhaps, to positive philosophy, I suggest to my right hon. Friend the Chancellor that he produced a good Budget. He will have difficulties as the economy unfolds. We cannot expect the fruits of devaluation in two years. It took the French five. My advice to my right hon. Friend is, "Sit tight".

8.53 p.m.

Mr. Biffen: I feel that in his absence I should apologise to the Financial Secretary to the Treasury because in an earlier exchange with the hon. Member for Aston-under-Lyne (Mr. Sheldon) I referred to him as an intellectual, and that is an abusive term. I have such a respect for the entrepreneurial skill and success of the Financial Secretary to the Treasury that I should not like it to go on record unconnected that I deprecated him as an intellectual.
My hon. Friend the Member for Shipley (Mr. Hirst) who, a week ago, very pertinently asked the leader of the House whether we could have a debate on the deteriorating economic situation, was assured by the Leader of the House that the Finance Bill debates would dominate most of this week's proceedings. In fact, the Leader of the House said,
The hon. Member will remember that next week we are debating the Finance Bill. No doubt he will make a contribution."—[OFFICIAL REPORT, 27th June, 1968; Vol. 767, c. 819]
We are very grateful indeed that in opening the Third Reading debate the Chancellor gave a fairly generalised account of the situation as he saw it and as he related it to his Budget. Perhaps it was rather a generous interpretation of Third Reading, although I must confess that the most generous interpretation of Third Reading was that of those hon. Members who discussed whether the Bill should be debated up-

stairs in Committee or on the Floor of the House. I will make one brief comment on that. Incarcerated upstairs was the hon. Member who is my regular "pair" and that had a most debilitating effect on my social life.
The massive sum being additionally raised by the Bill, and particularly by Clauses 1, 2, 4, 5, 8 and 13—amounting in all to £923 million of additional taxation in a full year, to which my hon. Friend the Member for Worthing (Mr. Higgins) referred—has been the subject dominating our discussion tonight. It is being raised in the context of what the Government call their strategy to make devaluation work. This was, after all, the justification presented by the Chancellor when he sought to raise this sum. This strategy, and the unfolding of it in tactical terms, lies at the heart of the Bill.
That some of us may have doubts about both the strategy and the tactics hardly deserves the designation of Jeremiahs, the term used by the hon. Member for Heywood and Royton (Mr. Barnett), for even his inseparable hon. Friend, the Member for Ashton-under-Lyne admitted that in the past there had been some doubt about the timing of the Government's economic measures. It is precisely the timing and the sequence of events since devaluation that lie at the heart of a great deal of the controversy surrounding the Bill and the sums sought to be raised by it.
The original decision to move from one fixed rate to another was extremely unwise. It was, I fear, a missed opportunity to move to a floating rate. This is an aside because I wish to discipline myself to speak about what is in the Bill; but I regret that no references are made to floating rates, to increasing the price of gold or, indeed, to other desirable changes.
The confidence factor was vital to the whole strategy of devaluation. Once we had moved to the new fixed exchange rate, then the whole argument was that we would have a recovery in the balance of trade of a sufficient magnitude to enable the consequential and sought-after improvement in the balance of payments to proceed, free from the raids of speculation. The Chancellor waxed eloquent on this point and I must quote some of his words. [Interruption.] I appreciate


that his words may distress hon. Gentlemen Opposite, some of whom find his strategy as unacceptable as I do.

Mr. Dickens: For different reasons.

Mr. Biffen: That is why we are on different sides of the House and are long likely to remain so, except that the likelihood of political survival, in electoral terms, for right hon. and hon. Gentlemen opposite is in doubt. The Chancellor said:
No Chancellor can begin to guarantee success. But I believe that I have done what is necessary here at home to give us a high chance of achieving it. There is now no rational cause for the British economy not going forward to strong success. Our exchange rate is one that makes us fully competitive.
A little later he said:
In a rational world this should give us the firm prospect of a secure balance of payments and steady growth at home. Even"—
and this shows the confidence he had in his measures:
in an irrational one it gives us the great advantage of being able to speak with the knowledge that our own house is in order. And the voice in which we shall speak will be one of sanity …"—[OFFICIAL REPORT, 19th March, 1968; Vol. 761, c. 301–2.]
The whole point about the confidence factor which is implicit in the devaluation decision is that it has not emerged. There are plenty of arguments for saying that there are good prospects for improvement in the trade balance. It is perfectly true, for example, that the latest report from the Ministry of Technology on the index of engineering export orders shows an increase of 15 per cent. in terms of volume for the past three months over the preceding three months. No one argues—at least, I do not—that there are not very real tangible prospects of improvements in the balance of trade, and that to some extent they are being contributed to by this Bill. But I say that the confidence factor which the Chancellor of the Exchequer also argued would be encouraged by this Bill have not emerged. This is immensely serious because it could completely undo the strategy of devaluation as events have undermined the strategies of so many other policies which were supposed to lie at the very heart of the Government's management of the economy.
In this context of the timing of devaluation and dribbling out of the accom-

panying deflationary measures I want to quote from a private paper circulated by a most eminent economist—Professor Victor Morgan. I will quote from it only very briefly, but it deals with changes in stocks, a point of immense pertinence. After referring to changes in stocks during the first quarter of this year, Professor Morgan says:
The composition of the over-all figure is even more interesting. Wholesale stocks went up by £15 million and retail stocks by £46 million (the biggest rise since 1960) while those of manufacturers fell by an unprecedented £115 million. The rise in wholesale and retail stocks is no doubt a reflection of the consumer boom and of the desire of distributors as well as consumers to 'beat the Budget'. The size of the fall in manufacturers' stocks is surprising in view of the attempt to explain the high level of imports by reference to a building up of stocks of imported goods. Unless de-stocking of domestic goods was fantastically large there cannot have been much stockbuilding of imports.
In other words, we have seen a rise of imports largely reflected in consumer goods, and industrial re-stocking which has to come on a post-devaluation situation in post-devaluation payment terms. In this situation I do not foresee being borne out even the optimism that the Chancellor of the Exchequer today expressed about the balance of trade.
In precisely these circumstances we begin to understand that whatever confidence he may have had in the prospect of improvements in the balance of trade being able to see us through the next few months, people outside this country do not see them at all in that way. They do not see things moving in such a way as to lead to a restoration of confidence when there are so many factors at work in the world which would in any case undermine confidence—and the Chancellor of the Exchequer referred to one when he spoke of the French import restrictions.
There are implications immediately related to Clause 10, which deals with the the use of the regulator. I should not like it to be thought that there is not one voice in this Chamber which even now does not advocate an increase in indirect taxation. I argue that in the circumstances it is still necessary for the Chancellor to be ready to use his power—and, in my view, there is ample evidence that he may have to use it shortly—to increase indirect taxation given to him under Clause 10 of this


Bill. This is my analysis and my view. It flows from the quotations I have made from Professor Morgan's analysis. I do not expect hon. Members opposite to agree because I know that they want to talk about restricting portfolio investments and import controls. How they will relate that to what is in the Bill is always a challenge, but my deflationary argument is both consistent and related to the Bill.
Of course, I accept that this is a very imperfect situation because the real alternative is substantial significant reductions in public expenditure. In arguing for the use of Clause 10 I am arguing only that this is a vital factor if we wish to preserve foreign confidence in sterling and to avoid being driven into import controls or into portfolio regulations on overseas sterling, both of which have been explicitly rejected by the Chancellor within the last few days.

Mr. Dickens: The hon. Member is noted for his integrity and straightforwardness. He said that the Government should make further cuts in public expenditure. Will he tell the House in what he thinks those cuts should be? Should they be in the increases which have taken place, or in absolute terms?

Sir C. Osborne: That is not in the Bill.

Mr. Deputy Speaker: I think it would be out of order if the hon. Member for Oswestry (Mr. Biffen) followed that supplementary question.

Mr. Biffen: If I may, I refer the hon. Member for Lewisham, West (Mr. Dickens) to an article which appeared some time ago in the City Press in which I have elaborated my views on public expenditure. It is a matter of major political embarrassment which I am sure will find its way into Labour speakers' handbooks. I have elaborated whole areas of public expenditure in which I think cuts could be made.

Sir Knox Cunningham: Does my hon. Friend agree that cuts in public expenditure will never be made by this Government, and that the sooner the Government get out the sooner we can succeed in getting cuts and getting our economy right?

Mr. Biffen: It would be a bold man who disagreed with my hon. and learned Friend the Member for Antrim, South (Sir Knox Cunningham).

Sir S. Osborne: And it is not in the Bill.

Mr. Biffen: That also is not in the Bill.
I think everyone appreciates that it is courageous for any Chancellor to seek to raise the unprecedented sums of money which the right hon. Gentleman is raising in the Bill before us. The fact is, however, that the overall strategy was to provide confidence and would be the final act in the devaluation drama, that our balance of trade would show such tangible prospects of improvement that the other confidence factors would then disappear. This has not happened and the fact that the Chancellor in speaking this evening did not address himself to this aspect, this most real and frightening aspect of the situation, is immensely disturbing.
The Chancellor is a very experienced parliamentarian but I think that this evening there were all the signs that his customary urbanity had shaded into complacency. We have had this situation all too often in the past. It gives me no pleasure partly to endorse at least and call for increased indirect taxation, but anyone who believes that this Budget and what it contains, and this Bill and what it contains, are enough to see us through the next few months is, I think, taking a gamble. It is a gamble which is unjustified and is characteristic of this Government.

9.10 p.m.

Mr. Dickens: Before dealing with the Bill, I want to make a few remarks about the proceedings in Committee. I am one of those who believe that it was a wise decision to send the Bill to Standing Committee. I deplore the fact that the Opposition made such unintelligent use of the time available to them. It is the duty of the Opposition always to oppose, but it is a standing reproach to the Tory Opposition that we have not had time, either in Committee or on the Floor of the House, to debate the only radical provision in the Bill which affects the wealthy, namely, Part IV on the special charge.
One major reason for that is that we spent rather more than eight hours on Committee discussing a succession of footling, childish points of order concerned with whether Members should sit in shirt sleeves, whether there should be two or three fans on, whether the postal services were adequate, and so on. I hope that, in future years, when the Bill goes to Standing Committee, the facilities available to Members can be improved. However, hon. Members opposite make poor use of the time available if they concentrate for the first day or two in Committee on such trivial matters as those which I have enumerated.
The right hon. Member for Enfield, West (Mr. Iain Macleod) is one of the ablest and more ambitious politicians in the House and he opposed this procedural reform. He was peeved, because the Bill being taken in Standing Committee kept him from the Floor of the House and denied him the publicity which he would have received here. Further—I say this to the right hon. Gentleman with great respect—he has met his debating match in my right hon. Friend the Chancellor of the Exchequer. This may explain some of the extremely uncharacteristic remarks which the right hon. Gentleman made, some of them very rude, some of them very arrogant, some of them very offensive, in attacking my right hon. Friend the Chancellor in Committee. I hope that, on reflection, the right hon. Gentleman will see fit to withdraw some of the remarks he made in Committee.
I do not agree with my right hon. Friend the Chancellor that we should debate simply the technical Clauses in Committee and debate the so-called wide-ranging, non-controversial Clauses on the Floor of the House. I want to see either one thing or the other— either the Bill taken in a Standing Committee composed of people who are basically interested in this subject, or the Bill taken in Committee of the whole House.
Throughout this debate there has been considerable discussion about the proceedings in Committee. Hon. Members on both sides have taken the opportunity, under the generosity of either Mr. Speaker or Mr. Deputy Speaker, to discuss wide-ranging aspects of Budget

strategy and of the Budget. I intend to follow suit. Thus, I want to make some comments on indirect taxation and on the special charge.
I strongly take issue with the prevailing trend of opinion expressed in the debate that what the country needs above all else is a move from direct to indirect taxation. People who argue this case live in a world of cloud-cuckooland. At present, most people earning between £600 and £2,500 per annum—many surveys bear this out—devote about 28 per cent. of their income, at that level and at higher levels, to taxation in all forms. This means, in effect, that the progressiveness of Income Tax has now largely been overtaken by the regressive-ness of indirect taxation, and indirect taxation, especially the Purchase Tax and the increase in the Selective Employment Tax, bears most bears most heavily on those least able to pay.
It was for this reason, because two-thirds of the increased taxation provided under it is indirect and thus regressive that the T.U.C. condemned the Budget for placing additional burdens on working people. Moreover, the Government have increased the Purchase Tax, for example, on necessities to 12½ per cent. We as a party—I remind my right hon. Friend of this—claimed at earlier general elections that we stood for the abolition of the Purchase Tax on essential items. I very much hope that we shall return to that position. I am not arguing a case against all forms of indirect taxation. One must be highly selective. One must clearly differentiate between taxation on luxury items and taxation on essentials.
I turn now to Part IV of the Bill and the special charge. In my view, the special charge is the best element in the whole Bill. At long last, it makes some attempt in this country to come to grips with taxation of capital. Just in case right hon. and hon. Members opposite have any doubt about the views of my right hon. Friend the Chancellor, it may be instructive to remind them and the House of some of his earlier words in this connection. In earlier days, my right hon. Friend was accustomed to contribute to Tribune. In 1951, he penned not an article but a pamphlet for Tribune entitled "Fair Shares for the Rich". I


mentioned this the other day to my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot), and, with his characteristic chuckle, he said, "Yes, I remember it. I devised the title for it, and a jolly good pamphlet it was". The very first sentence of that pamphlet read:
Perhaps the greatest evil of capitalism is the gross maldistribution of wealth, both capital and income, to which it has led.
In 1953, the present Chancellor of the Exchequer, in a subsequent publication, his essay on wealth in the "New Fabian Essays" of that year, said:
Capital taxation is an attack on the roots of inequality and not on its surface manifestations. It must play a large part in the fiscal policies of future Labour Governments.
I hope that right hon. and hon. Members opposite will take cognisance that this year the special levy is, as it were, simply a preliminary reconnaissance in this field. There is ample need for it. In 1938, when Mr. Neville Chamberlain was Prime Minister, of all the tax revenue coming into the Exchequer about 6·4 per cent. came from taxation of capital through Estate Duty. In 1968, 30 years on and after three decades of war taxation and welfare economics, the proportion has fallen to just on 3 per cent.
When the right hon. Member for Enfield, West calls, as he did in Committee, for a broader base for taxation, I put to him, and to my right hon. Friends in the House, that the very first requirement is not to increase indirect taxation but to put much higher taxes on capital and on wealth, for that source is in this country grossly under-taxed at present. Not only is this true in comparison with the past in Britain. It is true also by comparison with virtually every other advanced industrial country of Western Europe.

Mr. Speaker: Order. In this debate, the hon. Gentleman cannot seek to amend the Bill.

Mr. Dickens: I am not seeking to amend it, Mr. Speaker. I am merely giving my views on the attractiveness of Part IV and making some exploratory suggestions for future action. I make the point in passing that on Part IV, the special charge, my right hon. Friend has my enthusiastic support, and I hope that

he will regard this as a sufficient inducement to proceed further next year.
On Part V, dealing with the Selective Employment Tax—

Sir C. Osborne: Sir C. Osborne rose—

Mr. Dickens: I shall not give way— not this evening and not to the hon. Gentleman. We are having a serious debate.
On Part V, dealing with Selective Employment Tax, I make the point in passing to my right hon. Friend that many of us were much disappointed that a unique anomaly affecting a vital British industry, book publishing, was not remedied in the Bill. It was not remedied on Report, as we had thought that it might be. I very much hope that when the country's economic conditions are easier we shall see that the Selective Employment Tax is removed from book publishers, because at present they are in a totally anomalous position.

Mr. Speaker: Order. It is not removed in the Bill, and we must wait for another Bill to talk about it.

Mr. Dickens: I am grateful to you for reminding me, Mr. Speaker, and I pass to Part VI, dealing with National Savings.
The time has come for a complete review of the whole rôle and function of the National Savings movement. We should look toward a position in which it is raising savings at an appropriately higher rate of interest, much higher than the Post Office Savings Bank or other forms of national saving are at present allowed to pay. I am encouraged by my right hon. Friend's remarks yesterday that he is making a review of National Savings and the opportunities for newer forms of savings.
Earlier tonight my right hon. Friend referred to his overall Budget strategy. My views on it are well known. I am totally opposed to the Government's present Budget strategy and to most of the main elements of their economic policy. I say that because I believe that the advantages the country could obtain and can still obtain from devaluation, which was a right and necessary step to take last autumn, are being squandered by the Government's failure to take certain additional steps.
The Budget is part three of the steps that followed from devaluation. We had the immediate measures after devaluation, which took £750 million out of the economy; we had the January statement of my right hon. Friend the Prime Minister, which cut public expenditure this year by just over £325 million; and we had a Budget which takes £775 million out of the economy in this financial year and £923 million in a full year.
The time has come totally to reappraise the country's economic strategy and the strategy of my right hon. Friend's Budget. I do not say this because I believe that the strategy does not have a chance of success. I think that it has, but the odds are overwhelmingly against us. The international climate is such that the pound is totally over-exposed, as a reserve currency and a trading currency. It is subject to every conceivable strain at home and abroad. If the girls in the Folies Bergères go on strike there is a run on the pound. We must get away from this situation. We must take steps without delay to stop this exposure of our currency, which other people are using to suit their trading convenience at great detriment to this country, by first reimposing the exchange controls that the party opposite—

Mr. Speaker: Order. We must keep to the Bill. We are discussing what is in it. We can denounce it, but we cannot make all sorts of other suggestions—not on Third Reading.

Mr. Dickens: I much respect your Ruling, Mr. Speaker. I simply draw attention to the fact that earlier speakers had the opportunity that I now seek to discuss the wider Budget strategy. My righ hon. Friend did so in his introductory remarks, and other Members have done so. With your approval, I hope that I may conclude by making one or two brief references along those lines.
I want to see my right hon. Friend protect the currency along the lines that I have argued in earlier debates. I want to see him taking steps to mobilise our immense resources abroad by liquidating our portfolio investments in North America and using them to buy at the more volatile short-term investments. I want him to pay attention to the steep rise in imports in the first quarter of the

year. The rise in the volume of imported manufactured goods was 15 per cent. above that for the first quarter of 1957. We should attend to this.
I know that my right hon. Friend is giving these matters urgent and anxious attention, and I hope that he has found the constructive proposals put forward by a number of us on this side of the House, with the full support of the trade union movement and with the support of a wide and growing volume of opinion in the universities and the Press, ones to which he will turn his attention without delay.
My hon. Friend the Member for Heywood and Royton (Mr. Barnett) said there seemed to be building up almost an annual July crisis. It is well known that the Government are currently involved in international negotiations to obtain a long-term loan to fund the short-term sterling balances. That to me is a very much fourth-class alternative to the ideas we have put forward. If there is any question of the Chancellor coming before the House with proposals that he has been induced to adopt as a consequence of obtaining this loan which will result in further deflationary measures, he will meet with the most vigorous opposition from these benches and, I think, the entire House. The time has come for the Government to stand resolute and oppose any suggestion that those proposals should be adopted.
I hope that the Budget this year will be regarded in a sense as the last of its kind in that it has far too many proposals which are characteristic of the Conservative Party. In another way I hope it may be regarded as the first of its kind because it genuinely tries to get to grips with some social inequalities through the special charge, and in that I wish my right hon. Friend all success in his future endeavours.

9.28 p.m.

Mr. Michael Alison: I am not sure whether to react to the speech of the hon. Member for Lewisham, West (Mr. Dickens) in anger or in sorrow. I was rather angry when he spent the greater proportion of his speech criticising our criticism of the Committee stage being held upstairs than we spent up there criticising it. The hon. Member


spoke of eight hours. I carefully timed the proportion of his admirably compact speech which he devoted to his criticisms of our conduct in Standing Committee, and it was an immeasureably greater proportion of his speech than our criticisms levelled in the Standing Committee represented.
I am pre-eminently sorry for the hon. Gentleman about two things which are important to him. One is direct taxation, which is progressive as opposed to indirect. His right hon. Friend has told him that we have reached the end of the road there, and so there is no golden prospect in that direction.

Mr. Dickens: Who said it?

Mr. Alison: The hon. Gentleman's right hon. Friend has just given a most interesting interview on Grenada Television about the limit possibly having been reached—he agreed with the commentator—in direct taxation. As to the red meat of the special charge, I feel sorry for the hon. Gentleman about this. It is once-for-all charge. He will never get another chance. So the hon. Member has had it in every direction.
I want to chime in with my hon. Friend the Member for Oswestry (Mr. Biffen) in echoing the feeling that the Chancellor of the Exchequer has sounded a note of complacency. He has given the impression that the Bill is a fully rigged ship, carrying a good deal of canvas and ploughing steadily on, in spite of some very rough weather, and she is on course.
If we look at the situation in slightly greater detail, we find that there is a good deal less ground for complacency or encouragement. I thought that the most interesting, most tell-tale, give-away point of the Chancellor of the Exchequer was his indication that the level of consumer expenditure by the end of the first half of this year would be running at roughly the same level as it was at the end of the first half of 1967. This is a staggering indictment of the success or failure of the Government's policy.
Let us consider the steps which the Government have taken in their massive attempt to make room for the shift of resources to exports. Since the middle of 1967, we have been in a period of unprecedented emphasis on incomes policy. There were the hire-purchase

charges on car prices in November. We have had the biggest tax raising Budget in peace time—we are discussing it now. There were the bank lending restrictions at the end of May, which were incidentally, substantially later than the introduction of the Budget. We have had devaluation, with all the implied effects on import prices and the checking of consumer expenditure. In spite of all that, the Chancellor says that we shall have just managed to reach the level of consumer expenditure which obtained in the middle of 1967. If this is an indication of a successful Budget strategy, then it will not get us very far. This gives the impression that we have simply had a string of unco-ordinated, ad hoc emergency measures unrelated to one another.
The Chancellor spoke, admittedly, about what he described as the time lag. But one of the curious features of the Bill is that there is in it and the proposals for tax changes an entirely irrational yet purpose-built time lag. If we consider the impact of the fiscal measures which the Chancellor has introduced, we find that they spring up at different times in the coming financial year, and usually in the wrong order from the strategic point of view. In the Inland Revenue category of the taxes he is raising, the immediate impact of the Inland Revenue measures is on the corporate sector. The first people who will be bitten are the companies upon which our future depends and which are immediately landed with the extra £100 million.
The reduction in the personal allowances, worth about £83 million to the Chancellor, is entirely offset by the increase in family allowances. The special charge has no effect on consumption. It is entirely a capital debt. It will be paid out of capital and will have no effect on consumption. On the Inland Revenue side, the first bite of the Bill is on the corporate sector. Is this the sector which we should clobber in the Budget? These are the people who will feel the cold wind of the Budget first.
The same thing applies in connection with Customs and Excise. Admittedly Purchase Tax bites early on the consumer, but hydrocarbon oil charges have at least an equal effect on commercial undertakings. With regard to the motor vehicle licence decision—one of the major


items meant to hit the consumer—my guess is that it will not start bringing in extra revenue until very late in the year because I imagine that as a result of the warning which we were given before the Budget a great many people bought and licensed new cars before 19th March. The increase in vehicle licence charges will probably take effect right at the end of the fiscal year. That will mean another big delay.
The same applies to the Selective Employment Tax. It will hit early and will not come into effect until September. Again, the consumer tends to be let off lightly. The more we look at it, the longer the time lag becomes. But it is in the wrong direction. The cold wind will blow on the consumer late and on the corporate sector much too early.
The Corporation Tax will hit the productive sector of the economy. The Selective Employment Tax, whether on the service industry or indirectly—and there is a major indirect effect upon manufacturing industry—comes in as another feature on the productive side of industry. The Customs and Excise taxation will have its effect on commercial undertakings, which will be affected also by vehicle licence taxation. The real burden will be borne by the corporate sector, which is the one sector that we should try to help.
I remind the House that the crucial thing for the prospects for exports is not the success or otherwise in keeping price levels steady for exporting firms, because I believe that there is a good deal of flexibility in what overseas buyers are prepared to pay or to buy. The real issue is the modern ideas, new techniques and the new investment which goes into manufacturing industry, producing new kinds of machine tools, new styles and designs of commercial vehicles, and so on. It is investment in manufacturing industry which will suffer from the heavy impost on the corporate sector of the economy.
I reiterate what my hon. Friend the Member for Oswestry (Mr. Biffen) said in quoting Professor Morgan. Exactly the same point is made in the June Monthly Summary of Business Conditions by "The III Banks", from which I quote:
Industrial investment increased 2 per cent. in the first quarter, according to provisional

estimates, with increases in the distributive, service and shipping industries"—
a perverse outcome to the application to S.E.T. and to investment incentives for manufacturing industry, one might add in passing—
but a further decline in manufacturers' investment. Estimates for stockbuilding show an increase for wholesalers and retailers, more than offset by a further fall in the volume of manufacturers' stocks.
We have, therefore, exactly the opposite effect of what the Government should be seeking to achieve—a continuing decline in manufacturing estimate, a perverse rise in the investment in service and distribution industries and the consumer let off until relatively late in the fiscal year, by which time we may well have missed what might be called the spring tide for selling overseas.
We must not forget that even more important than devaluation and the effects in France following the difficulties in that country is the coming into effect on 1st July of the new common external tariff of the Common Market, which means that the Germans at least will be putting up their tariffs against us in some of our most important sectors.

9.37 p.m.

Mr. Orme: I shall be brief but, having listened to most of the Third Reading debate, I wish to deal with a point concerning the Budget strategy, the strategy of my right hon. Friend the Chancellor of the Exchequer and the Bill itself. Before doing so, however, as most other hon. Members have appeared to refer in passing to the passage of the Bill in Committee upstairs, I think it is fair to say, as a member of the Standing Committee and as one who has advocated that the Finance Bill should go upstairs, that although during the first few sittings of the Committee I was sceptical about whether the arrangement would be a success, I have come firmly to the conclusion that the Finance Bill gets more detailed examination upstairs than it ever does on the Floor of the House.

Mr. John Smith: The hon. Member was hardly ever there.

Mr. Orme: The hon. Member for the Cities of London and Westminster (Mr. John Smith) is the last person to question


me on this, because we could go into great depth about his contributions upstairs. I agree that many things want changing in the conduct of the sittings, but the right hon. Member for Enfield, West (Mr. Iain Macleod) should not take it that he is playing in the second eleven because the Bill has been sent upstairs.
The attendance of hon. Members in Committee and the basic and fundamental issues that we discussed showed the division which existed between the parties, and the debates went into great detail. I feel that my right hon. Friend the Chancellor of the Exchequer, uncharacteristically for him, has already taken fright and announced basic alterations in his thinking about what might happen next year. With my hon. Friend the Member for Heywood and Royton (Mr. Barnett) and many other hon. Members who served on the Committee upstairs, I hope that my right hon'. Friend will give another year to the Finance Bill experiment upstairs. In consequence, we feel that if we set out with a timetable we could properly discuss these matters.

Mr. Speaker: Order. We cannot debate the procedure for next year's Finance Bill.

Mr. Orme: I appreciate that, Mr. Speaker, but this was mentioned by the hon. Member for Worthing (Mr. Higgins) and some of my hon. Friends. Therefore, I wanted to refer in passing to this year and perhaps draw some conclusions for the future.
The basic problem with which I want to deal, arising from the Budget strategy, is unemployment. Some of my hon. Friends have dealt with other aspects. I agree particularly with many of the suggestions and criticisms put forward by my hon. Friend the Member for Lewisham, West (Mr. Dickens).
The Chancellor has taken £923 million purchasing power out of the economy. This is already beginning to take effect. I accept that S.E.T. has not yet started. Nevertheless, it is beginning to bite.
Exports are increasing at the present time, but, for some reason, unemployment is rising. I speak now from an industrial point of view. There is great concern in the country about the manner in which unemployment is not just sticking but is rising. I was alarmed the other

day to hear Mr. Aubrey Jones, at a Press Gallery lunch, talking about the Chancellor's strategy and Budget, refer to the fact that, for the first time in modern history, this country had a position where unemployment was rising but production was rising at the same time. He seemed to welcome this fact. In other words, he welcomed that we should have a higher level of unemplopment. This, to me and to many of my hon. Friends, is completely unacceptable. If we cannot envisage a strategy whereby we can move back to full employment, we must find other ways of running our modern industrial economy.
What does my right hon. Friend envisage as the prospect for unemployment during the coming autumn and winter months? When we have got rid of the seasonally adjusted figures, will unemployment rise beyond 600,000 or 700,000? I believe that this is of paramount importance to the economy. This is not a question of, as it were, crying scared before the event. It is looking at the event as it is happening reading the figures before us. As each month's figures for unemployment come out, one sees that they are rising. I am very concerned about this.
If, as has been stated, we are taking out over £200 million—I think that was the figure quoted during the prices and incomes debate—this will have a severe deflationary effect. What will then be the added effect of S.E.T. in the autumn?
I know that my right hon. Friend the Chancellor must be concerned about this. I know also that his right hon. Friend the Prime Minister today, in the House, said that we must get full employment through the export-led boom and it would be no boost to the consumer industry to achieve the reduction for which some were pressing in the House earlier. That might sound all right, but some industries are not affected by the export-led boom. There are areas in this country that are still basically finding that unemployment remains difficult to remove.
I am deeply concerned about this situation. I know that my friends in the trade union movement are unhappy that this is happening in the middle of the summer. I urge the Government to give the matter the most serious consideration and to take the necessary steps to deal with it before things get any


worse, because we foresee an extremely serious situation developing by the winter. If the strategy adopted by my right hon. Friend to bring about a reduction in purchasing power, which he hopes will in itself restrict the purchase of imports, does not work, he will have to take other measures which most of us have been advocating, instead of allowing unemployment to increase.

9.45 p.m.

Mr. Iain Macleod: At an appropriate point in what will be a short speech I shall make some reference to the extremely interesting point which the hon. Member for Salford, West (Mr. Orme) made about unemployment. He knows that I share his anxiety about this matter.
The Motion before the House is, "That the Bill be now read the Third time". One is tempted to ask, what Bill? We had to pass a special Motion this afternoon, contrary to our custom, to enable us to discuss a Bill which does not exist. The latest copy which I have has, for example, an interesting Clause 50 entitled, "Provision for a National Lottery", but the only Clause which was put to a free vote of the House was appropriately rejected and, presumably, will not appear in the final version of the Bill. We also this afternoon, at high speed, put in about 100 Government Amendments, and much of the Bill, including, in particular, one Schedule to which I shall refer, is not before the House. All this concentration is to meet the traditional deadline of 5th July, for today is, of course, the 4th. I have always thought that the Chancellor was wrong to attach any particular importance to this date, and I think it has now been shown that it is not a necessary part of our affairs.
I hold the view that the most boring of all debates are those in which Guillotine battles are fought all over again, and I propose to make very little reference to the question of who was to blame in this matter. The hon. Members for Heywood and Royton (Mr. Barnett) and Ashton-under-Lyne (Mr. Sheldon) have a simple answer. They say that it is my fault. I can never be sure whether the heavenly twins are really very simple people or whether they are very clever people who constantly affect simplicity. I

suspect that it is the second of the two, but, if they will allow me to make one observation, it is that both of them came into the House in, I think, 1964, they have therefore only had the experience of sitting on the Government benches during Finance Bills, and as in the nature of things unhappily they will not be with us in the next Parliament, their education will remain somewhat incomplete.
It is a matter which, as a former Leader of the House, I have always taken a great interest in, and I respond to some'thing the Chancellor said earlier. I invite the House simply to consider for a moment one Clause and one Schedule. I refer to Clause 16 and Schedule 9. The Chair upstairs selected no fewer than 36 Amendments on this entirely non-controversial Clause and this equally non-controversial Schedule. I was horrified, but the Chair and its advisers were right. There is no question about it, and it is very difficult to see how even into a Guillotine timetable one can fit sensible discussion of that length. The discussions took the whole of a day and the whole of a night and, as a result, the Schedule was entirely rewritten and over 50 Amendments to it were put before the House this afternoon.
It is clear that we ought at least to look at special methods of considering Clauses and Schedules of that nature. It does not matter what solution we come to, but that sort of procedure—which was wholly right; the Chair both downstairs and upstairs was entirely right in what it did— cannot be tortured into a normal Committee such as we have upstairs or downstairs. My view, as is known to the House, is that the right and best solution is that all stages should be held on the Floor of the House. Nevertheless, I would wish to study what the Chancellor said today, because on Clauses like that which I have indicated—and there are some others—I can see a genuine case for special treatment, which might take the form of a division of the Bill. I do not want to go beyond that now. I will study the Chancellor's exact words in HANSARD.
Many recent Finance Bills have become quite irrelevant by the time they reached the Third Reading debate or, at any rate, the Recess. That was true of


the 1966 Bill, which was completely overwhelmed by the measures of 20th July. It was true of the 1967 Bill, when "Steady as she goes" turned out to be a journey towards the rocks of devaluation. This Finance Bill, to which, if the House agrees, a Third Reading will be given tonight, has more relevance—and that would not be difficult—than any of the previous Bills that we have had to consider.
Yet my view of it and of the Chancellor's Budget statement remains basically the same as when I first spoke after him. I have consistently been less optimistic than he has, as he knows, and I would argue that all the developments—the new forecasts of the National Institute and the Chancellor's hedging this evining—make it clear that events have come closer to the view that I put before the House at the time of the Budget and the Second Reading debate than the view of the Chancellor.
The Chancellor misunderstands the point that we have made to him about forecasts. It is an excellent thing to make forecasts; it is absurd to be bound by them and to try to torture events to fit a forecast that has been made. If one makes a forecast in the great field of economic affairs with which the Chancellor deals and it comes out right, almost certainly it is an accident; almost certainly it is a combination of two or more errors cancelling themselves out. This is not an argument against making forecasts. In passing, I have always thought that the error of the National Plan was that it attempted to be precise about 1970 but was vague about the years until we got there, whereas any ordinary business forecast does exactly the reverse; it is precise about what is to happen in the next weeks or months and vague as the years go on.
The Chancellor seemed to think that there was something wrong in adjusting a forecast. On the contrary, I think that he should constantly adjust it, because if he does not he will torture events to make them fit the forecast.
I want to refer to two points, both of which the Chancellor mentioned and both of which I mention only in passing, because we may have an economic debate and it would be more appropriate

to develop these points then. The first is the question of unemployment, to which the hon. Member for Salford, West referred. After some pressing the Chancellor told me that he expected the trend of unemployment to improve.
In each of the four months since then, the situation has got worse. We are now, with the June figures, perhaps at the peak of employment. It rather depends upon when the Scottish school leavers come in as to whether July will go higher. August certainly will. So the gross figures will increase almost from now on, with the possible exception of July. But what is more significant still is not just that the June figure is the worst since 1940, but that, seasonally adjusted, the wholly unemployed figure now, in June, is slightly higher than even the peak at the winter time of the 1963 figures and is perhaps the highest figure, except for peaks like a fuel crisis, since the war. It is this that worries the hon. Member for Salford, West.
Of course there will be something of a lift in exports, and this will help the unemployment situation, but there are, in my judgment, three factors which must be considered on the other side. There is the question of pit closures, there is the effect of the Budget, which has not had its full effect yet, and of course, there is the effect of S.E.T. in the autumn, which, in certain fields, can have a dramatic effect, as we know so well, upon unemployment. I leave that with an expression of anxiety, and will develop it further if we have an economic debate.
The other matter to which the Chancellor referred is the export-import balance. He now thinks that he will probably get at least his main forecast and that he may get his higher forecast. I think that that is a fair way of putting what he feels about exports, although exactly what it will mean in terms of new foreign currency coming into this country is not completely clear. But I have little doubt—again, I merely make the point and leave it for debate—that the propensity to import was considerably higher than the Government ever thought, and perhaps higher even than anyone ever thought. To that extent, the balance which they have been seeking between exports and imports is unlikely to be achieved.
it is for this reason that the Chancellor's forecasts for the second half of the year and for 1969 have been increasingly suspect, particularly from this side of the House. My hon. Friend the Member for Oswestry, (Mr. Biffen) was exactly right in what he said about the question of a re-stocking boom, for various reasons. That may still come.
I turn from the right hon. Gentleman's general point just to pick out one other. I want to elaborate the point made by my hon. Friend the Member for Worthing (Mr. Higgins), who referred particularly to the Chief Secretary, who I thought, in these debates, was the star of the Treasury team. We disagreed a good deal with him, but we were grateful for the way that he answered the debates. His hon. Friend the Member for Chislehurst (Mr. Macdonald) said on Second Reading, I think, that he wished that the Chief Secretary would take time off from his ceaseless pursuit of matters of tax avoidance and evasion.
I want to put it to the right hon. Gentleman that this obsession of his—I believe it to be an obsession—is doing infinite harm. It is odd that such an admirable activity should do infinite harm, but I am certain that it does. Anyone who listened—[Interruption.]—we will come to that in a minute. Anyone who listened to the debates, for instance, on close companies, and the Minister of State's replies, would gather that the Treasury Bench look on close companies as a sort of tax haven, whereas they are part of the true foundation of much of the nation's strength.
A number of references have been made to a brilliant speech recently delivered by Professor Wheatcroft and I will read just one extract from it, referring directly to the Chief Secretary. This is what Professor Wheatcroft said:
I am fully persuaded that one of the main reasons why this country lacked growth in 1966 and 1967 was the pre-occupation of so many businessmen with tax. They had to come to lectures, read numerous papers and articles and consult professional advisers in order to understand how they sshould conduct their affairs in future, having regard to these new, complicated and obscure taxes. Instead of getting on with their normal task of producing goods or services at the lowest cost, they had to learn to re-adjust their activities in the light of the new taxes as otherwise they would quickly be out of business.

I believe that to be exactly true, and I am sure that the Chief Secretary knows that Professor Wheatcroft's judgment will command respect.
The Chief Secretary knows very well that we have concentrated a great deal of our attack on the Bill on Clause 15 and Schedule 8. He knows very well that principally in that Clause we tried to secure compensation not just for the thalidomide cases, which we did, but for the breadwinner and those affected by broken marriages, for example. The answer which we were given, right up to last night, by the Chief Secretary, led one to the conclusion that he was thinking only in terms of tax evasion, as if people got themselves killed or divorced in order to avoid the payment of tax.
I quote from a letter which the Chief Secretary wrote to me on 25th June explaining why he could not meet a particular case, in relation to this issue, which I had put to him. He wrote:
I recognise that this is not the answer for which you had hoped; but perhaps I could make two final points. Firstly, cases of this kind, on any basis, are likely to be pretty few. Secondly; what cases there are will consist mainly of older children.
What an appalling argument to put forward to meet an admitted injustice! The Bill is full of injustices. It is full of petty meannesses. Throughout our opposition we have made that clear to the Treasury Bench, but they had not been ready to meet the cases which we put to them, particularly on Clause 15.
As I conclude, I give my warmest thanks to the team who worked with me in the various stages of the Bill. They are too many to single out, but it would be wrong of me not to mention my hon. Friends the Members for Worthing and Wanstead and Woodford (Mr. Patrick Jenkin), who have battled manfully and who have outgunned the Treasury team at all points.
We come to the last stage of the Bill. It was at one time unusual to vote against a Third Reading, but there have been a number of examples of such a vote in recent years and I have no hesitation at all in inviting my right hon. and hon. Friends to vote against the Third Reading of this Bill, not just because in a full year it will take £923 million, by far the largest sum ever raised in increased taxation in a Budget, from the people of


this country, but more because it is a monument to the failure of the Chancellor of the Exchequer and of the Government, first, to control public expenditure in this country and, secondly, to encourage the flood of savings which we believe can be tapped for the benefit of the country. In our view the Bill is unfair. It enshrines policies to which we are bitterly opposed. I therefore invite my hon. and right hon. Friends to oppose it on Third Reading.

10.5 p.m.

Mr. Diamond: The right hon. Member for Enfield, West (Mr. Iain Macleod) referred at the outset of his speech to the difficulties experienced in discussing the Bill upstairs and to the problems arising out of our new procedure. I will devote the first few minutes of what I intend to be a short speech to that subject.
As the right hon. Gentleman said, this is not the appropriate occasion for a long economic; speech. One cannot deal with economic matters briefly. Moreover, my right hon. Friend said earlier what had to be said, and it would be impossible for me to reply in detail to all the points that have been raised. However, I assure hon. Members on both sides of the House that I have taken careful note of what they have said and that I hope to have an occasion to pursue these matters later.
In discussing the procedure which we adopted this year, I wish to mention some things in which I believe sincerely and profoundly. The success or otherwise of any experiment—indeed, of our ordinary procedure, but in particular of any experiment—depends on each one of us. It is our own self-discipline that makes this place work. You are in the Chair, Mr. Speaker, but you, too, would be incapable of maintaining order in the House if we had not all accepted and developed a proper sense of self-discipline in our affairs.
The experiment of taking a Bill upstairs also requires self-discipline. I regret that one cannot draw the conclusions that one might clearly have liked to have drawn from this experiment, since it was not given a fair chance. [HON. MEMBERS: "Rubbish."] The fact is that we have not had a full

and adequate discussion of all the important Clauses in the Bill.

Dame Irene Ward: Hear, hear.

Mr. Diamond: At the same time, we have spent more time discussing the Bill than any other Bill, with one exception, since the war. We must, therefore, draw the conclusion that we must think a little more carefully about what our methods should be.
The right hon. Member for Enfield, West knows as well as I do that I hope that on future occasions, not only on the Finance Bill but on other Measures, we could move more readily towards what I believe to be the only solution for adequate, crisp debate; and that is agreed, voluntary time-tables—[Interruption.]— agreed not necessarily in advance for the whole of a Bill but from time to time. The right hon. Gentleman's whole point in disliking this experiment is that he feels that he could manage affairs much better by discussions—

Dame Irene Ward: So he could.

Mr. Diamond: —on this sort of basis. I am saying that I very much hope that this—which I think is the next major step in democracy and which it is up to all of us to understand and to take—will be developed. It does not matter whether one is on the Government side of the House or in opposition. I have had many years of what I agree is the best schooling of all, and that is sitting on the benches opposite.

Sir D. Glover: Where the right hon. Gentleman will soon be again.

Mr. Diamond: The hon. Member for Ormskirk (Sir D. Glover) is the last person to challenge me on this. He will recollect that many years ago I said to him that he should not feel so uncomfortable. I explained to him that, like marriage, the first seven years are the worst. Who knows whether or not that may be true.
The next short point I would make about our procedure is that many hon. Members have felt excluded from our debates and that it has not been satisfactory to provide the alternative of extended time on the Floor of the House. I admit that the idea of giving yet a third time


for matters which have already been discussed twice invites no appetite. This means that we must develop some other method of dealing with the problem.
I would only say in this connection that I understand that an interesting experiment is going on in another place, where, for the first time, a Standing Committee has been set up composed of Members of all sides of that place and where it is open to any Member of that place to attend, move Amendments and speak to Amendments. In a matter like this, one wants to have regard to experience which we learn as we go along, and it is not wrong to refer once more to it. I gave evidence to the Select Committee: some may have thought one way, and others another.
I turn next to the very interesting speech of my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), who always speaks forthrightly. If I may say so, I thought that tonight he spoke with unusual forthrightness. I was not quite sure, having regard to the hour of the debate, whether his irritation was caused by his having to wait over-long for his dinner or by the fact—I could well understand it—that day after day and night after night he had had to endure debates in Committee without feeling free to make his proper contribution to them. For that self-discipline I thank him and, indeed, everyone who contributed so constructively to the passage of the Bill.
While I understand that he might have been seeking an opportunity to express some of his irritation and his indignation, I thought that it hit the wrong target. I know that he does not regard my hon. Friend the Financial Secretary in any but a warm and affectionate way, but perhaps as the Financial Secretary is not here I may reply to some of the points made by my hon. Friend.
My hon. Friend should realise that we have now had at least four investigations into the effect of higher taxes on willingness to earn, willingness to exert additional effort—their effect on over'time, and so on. A further investigation is now under way, the Reddaway Commission, commissioned by my right hon. Friend. It is not the case that we are not willing to examine these matters; we are most willing to do so. There may

be a useful field for further examination in due course. I have taken on board all that my hon. Friend said. I am sure that he did not wish to be unduly critical of the Financial Secretary.
I turn to what the right hon. Gentleman said about my attitude to tax and the Opposition's attitude to several of the major issues of the Bill. I am thinking of the aggregation of minors' income, of post-cessation receipts of certain professional men, mainly barristers, and of aggregation of policies which have previously escaped aggregation under the Married Women's Property Act. On all these matters I believe that the Opposition have not taken a reasonable point of opposition to excessive anti-tax aviodance activity on my part but have taken a line which is consistent only with maintaining tax privileges which are long overdue for reform. The aggregation of minors' income is long overdue. The post-cessation receipts of barristers—or, rather, of professional men—is a matter that everyone has been expecting to be dealt with year after year, and one, I should have thought, that most thinking members of that most respected profession would wish to have removed from their privileges.
It is extremely regrettable that the Opposition, in spite of the right hon. Gentleman's appreciation, which he expressed only a day or two ago, of the need of the Chancellor of the Exchequer to use every reasonable way to counter tax avoidance, should have fought, and fought so hard, and that, as he rightly said, what inevitably happens, happened. If individuals will not exert self-discipline, if Oppositions will not exert self-discipline, they can, of course, wreck the proceedings of this House. It is open to them to do so. All that the Government can then do is to respond in the way they have done. We have seen over the years that Opposition rights have been diminished by Government after Government because they have not been prepared themselves to restrict their own activities. I would be anxious to avoid any continuation of that. That is why I draw attention in particular to what the right hon. Gentleman said.
I sense that the House wishes to come to a conclusion on this matter. [HON. MEMBERS: "Hear, hear."] We have been discussing for a very long time and


I have been made very familiar indeed with these proposals. I do not share the view that the right hon. Gentleman expressed as to our future. I take the view that the Chancellor took. We are embarking on a difficult period. This Bill puts it in context. My right hon. Friend has said very plainly that we look to our people to do their best, notwithstanding that the level of consumption is not planned to be higher than it was

in the period of last autumn. That is a great challenge. My right hon. Friend did not promise anything easy. He referred to "two years of hard slog". We are starting those two years. I believe we shall pull though them satisfactorily.

Question put, That the Bill be now read the Third time:—

The House divided: Ayes 295, Noes 243.

Division No. 268.]
AYES
[10.17 p.m.


Albu, Austen
Dunn, James A.
Jeger, Mrs. Lena(H'b'n&amp;St.P'cras,S.)


Allaun, Frank
Dunnett, Jack
Jenkins, Hugh (Putney)


Alldritt, Walter
Dunwoody, Mrs. Gwyneth (Exeter)
Jenkins, Rt. Hn. Roy (Stechford)


Allen, Scholefield
Dunwoody, Dr. John (F'th &amp; C'b'e)
Johnson, Carol (Lewisham, S.)


Anderson, Donald
Edwards, Robert (Bilston)
Johnson, James (K'ston-on-Hull, W.)


Archer, Peter
Edwards, William (Merioneth)
Jones, Dan (Burnley)


Armstrong, Ernest
Ellis, John
Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)


Ashley, Jack
English, Michael
Jones, J. Idwal (Wrexham)


Atkins, Ronald (Preston, N.)
Ennals, David
Judd, Frank


Atkinson, Norman
Ensor, David
Kelley, Richard


Bacon, Rt. Hn. Alice
Evans, Albert (Islington, S.W.)
Kenyon, Clifford


Bagier, Gordon A. T.
Evans, Ioan L. (Birm'h'm, Yardley)
Kerr, Mrs. Anne (R'ter &amp; Chatham)


Barnes, Michael
Fitch, Alan
Kerr, Dr. David (W'worth, Central)


Barnett, Joel
Fletcher, Raymond (Ilkeston)
Kerr, Russell (Feltham)


Beaney, Alan
Fletcher, Ted (Darlington)
Lawson, George


Bence, Cyril
Foley, Maurice
Leadbitter, Ted


Benn, Rt. Hn. Anthony Wedgwood
Foot, Rt. Hn. Sir Dingle (Ipswich)
Ledger, Ron


Bennett, James (G'gow, Bridgeton)
Foot, Michael (Ebbw Vale)
Lee, Rt. Hn. Frederick (Newton)


Bidwell, Sydney
Ford, Ben
Lee, Rt. Hn. Jennie (Cannock)


Bishop, E. S.
Forrester, John
Lee, John (Reading)


Blackburn, F.
Fowler, Gerry
Lestor, Miss Joan


Boardman, H. (Leigh)
Fraser, John (Norwood)
Lever, L. M. (Ardwick)


Booth, Albert
Freeson, Reginald
Lewis, Arthur (W. Ham, N.)


Boston, Terence
Gardner, Tony
Lewis, Ron (Carlisle)


Bottomley, Rt. Hn. Arthur
Garrett, W. E.
Lipton, Marcus


Boyden, James
Ginsburg, David
Luard, Evan


Braddock, Mrs. E. M.
Gordon Walker, Rt. Hn. P. C.
Lyon, Alexander W. (York)


Bradley, Tom
Gourlay, Harry
Lyons, Edward (Bradford, E.)


Bray, Dr. Jeremy
Gray, Dr. Hugh
Mabon, Dr. J. Dickson


Brooks, Edwin
Greenwood, Rt. Hn. Anthony
McBride, Neil


Brown, Rt. Hn.George (Belper)
Gregory, Arnold
MacColl, James


Brown, Hugh D. (G'gow, Provan)
Griffiths, Eddie (Brightside)
MacDermot, Niall


Brown, Bob(N'c'tle-upon-Tyne,W.)
Griffiths, Rt. Hn. James (Llanelly)
Macdonald, A. H.


Brown, R. W. (Shoreditch &amp; F'bury)
Griffiths, Will (Exchange)
McGuire, Michael


Buchan, Norman
Gunter, Rt. Hn. R. J.
McKay, Mrs. Margaret


Buchanan, Richard
Hamilton, James (Bothwell)
Mackenzie, Gregor (Rutherglen)


Butler, Herbert (Hackney, C.)
Hamling, William
Mackie, John


Butler, Mrs. Joyce (Wood Green)
Hannan, William
Mackintosh, John P.


Cant, R. B.
Harper, Joseph
Maclennan, Robert


Carmichael, Neil
Harrison, Walter (Wakefield)
McNamara, J. Kevin


Carter-Jones, Lewis
Hart, Rt. Hn. Judith
Mahon, Peter (Preston, S.)


Castle, Rt. Hn. Barbara
Haseldine, Norman
Mahon, Simon (Bootle)


Cos, Denis
Hattersley, Roy
Mallalieu, E. L. (Brigg)


Coleman, Donald
Hazell, Bert
Mallalieu, J. P. W.(Huddersfield,E.)


Concannon, J. D.
Healey, Rt. Hn. Denis
Marks, Kenneth


Conlan, Bernard
Heffer, Eric S.
Marquand, David


Corbet, Mrs. Freda
Henig, Stanley
Marsh, Rt. Hn. Richard


Crawshaw, Richard
Herbison, Rt. Hn. Margaret
Mason, Rt. Hn. Roy


Cronin, John
Hobden, Dennis
Maxwell, Robert


Crosland, Rt. Hn. Anthony
Hooley, Frank
Mayhew, Christopher


Crossman, Rt. Hn. Richard
Horner, John
Mellish, Rt. Hn. Robert


Cullen, Mrs. Alice
Houghton, Rt. Hn. Douglas
Mendelson, J. J.


Dalyell, Tam
Howarth, Harry (Wellingborough)
Mikardo, Ian


Darling, Rt. Hn. George
Howell, Denis (Small Heath)
Millan, Bruce


Davidson, Arthur (Accrington)
Hoy, James
Miller, Dr. M. S.


Davies, Ednyfed Hudson (Conway)
Huckfield, Leslie
Milne, Edward (Blyth)


Davies, Harold (Leek)
Hughes, Rt. Hn. Cledwyn (Anglesey)
Mitchell, R. C. (S'th'pton, Test)


Davies, Ifor (Gower)
Hughes, Emrys (Ayrshire, S.)
Molloy, William


Delargy, Hugh
Hughes, Hector (Aberdeen, N.)
Moonman, Eric


Dell, Edmund
Hughes, Roy (Newport)
Morgan, Elystan (Cardiganshire)


Dempsey, James
Hynd, John
Morris, Alfred (Wythenshawe)


Dewar, Donald
Irvine, Sir Arthur (Edge Hill)
Morris, Charles R. (Openshaw)


Diamond., Rt. Hn. John
Jackson, Colin (B'h'se &amp; Spenb'gh)
Morris, John (Aberavon)


Dickens, James
Jackson, Peter M. (High Peak)
Moyle, Roland


Doig, Peter
Jay, Rt. Hn. Douglas
Mulley, Rt. Hn. Frederick




Murray, Albert
Reynolds, Rt. Hn. G. W.
Thomson, Rt. Hn. George


Neal, Harold
Rhodes, Geoffrey
Thornton, Ernest


Newens, Stan
Richard, Ivor
Tinn, James


Noel-Baker, Francis (Swindon)
Roberts, Albert (Normanton)
Tuck, Raphael


Noel-Baker,Rt.Hn.Philip (Derby, S.)
Roberts,Rt.Hn.Goronwy(Caernarvon)
Urwin, T. W.


Oakes, Gordon
Roberta, Gwtlym (Bedfordshire, S.)
Varley, Eric G.


Ogden, Eric
Robertson, John
Walker, Harold (Ooncaster)


O'Malley, Brian
Robinson, Rt. Hn. Kenneth (St.P'c'as)
Wallace, George


Oram, Albert E.
Robinson, W. O. J. (Walth'stow, E)
Watkins, David (Consett)


Orme, Stanley
Rodgers, William (Stockton)
Watkins, Tudor (Brecon &amp; Radnor)


Oswald, Thomas
Roebuck, Roy
Weitzman, David


Owen, Dr. David (Plymouth, S'tn)
Rogers, George (Kensington, N.)
Wellbeloved, James


Owen, Will (Morpeth)
Rose, Paul
Wells, William (Walsall, N.)


Page, Derek (King's Lynn)
Rowlands, E.
Whitaker, Ben


Paget, R. T.
Ryan, John
Whitlock, William


Pannell, Rt. Hn. Carles
Shaw, Arnole (llford, S.)
Wilkins, W.A.


Pannell, Rt. Hn. Charles
Sheldon, Robert
Willey, Rt. Hn. Frederick


Park, Trevor
Shinwell, Rt. Hn, E.
Williams, Alan (Swansea, W.)


Parker, John




Parkin,Ben (Paddington,N.)
shore, Rt. Hn. Peter
Williams, Alan Lee (Hornchurch)


Parkin Brian (Bedford, N.)
Short, Mrs. Renée (W'hampton, N. E.)
Williams, Clifford (Abertillery)


Pavitt Laurence
Silkin, Rt. Hn. JOhn (Deptord)
Williams, Mrs. Shirley (Hitchin)


Pearson, Arthur (Pontypridd)
Silverman, Julius
Williams, W. T. (Warrington)


Peart, Rt. Hn Fred
Slater, Joseph
Willis, Rt. Hn. George


Pentland, Norman
Snow, Julian
Wilson, Rt. Hn. Harold (Huyton)


Perry, Ernest C. (Battersea, S.)
Spriggs, Leslie
Wilson, William (Coventry, S.)


Perry, George H. (Nottingham, S. )
Steele, Thomas (Dunbartonshire, W.)
Winnick, David


Prentice, Rt. Hn. R. E.
Stewart, Rt. Hn. Michael
Woodburn, Rt. Hn. A.


Price, Christopher (Perry Barr)
Stonehouse, Rt. Hn. John
Woof, Robert


Price, Thomas (Westhoughton)
Strauss, Rt. Hn. G. R.
Wyatt, Woodrow


Price, William (Rugby)
Summerskill, Hn. Dr. Shirley
Yates, Victor


Probert, Arthur
Swingler, Stephen



Randall, Harry
Symonds, J. B.
TELLERS FOR THE AYES:


Rankin, John
Taverne, Dick
Mr. Charles Grey and


Rees, Merlyn
Thomas, Rt. Hn. George
Mr. John McCann.




NOES


Alison, Michael (Barkston Ash)
Costain, A. P.
Hamilton, Michael (Salisbury)


Allason, James (Hemel Hempstead)
Craddock, Sir Beresford (Spelthorne)
Harris, Frederic (Croydon, N.W.)


Astor, John
Crouch, David
Harrison, Brian (Maldon)


Atkins, Humphrey (M't'n &amp; M'd'n)
Crowder, F. P.
Harrison, Col. Sir Harwood (Eye)


Awdry, Daniel
Cunningham, Sir Knox
Harvey, Sir Arthur Vere


Baker, Kenneth (Acton)
Currie, G. B. H.
Harvie Anderson, Miss


Baker, W. H. K. (Banff)
Dalkeith, Earl of
Hastings, Stephen


Balniel, Lord
Dance, James
Hawkins, Paul


Barber, Rt. Hn. Anthony
Davidson, James (Aberdeenshire, W.)
Hay, John


Batsford, Brian
d'Avigdor-Goldsmid, Sir Henry
Heald, Rt. Hn. Sir Lionel


Beamish, Col. Sir Tufton
Dean, Paul (Somerset, N.)
Heath, Rt. Hn. Edward


Bell, Ronald
Deedes, Rt. Hn. W. F. (Ashford)
Heseltine, Michael


Bennett, Sir Frederic (Torquay)
Dodds-Parker, Douglas
Higgins, Terence L.


Bennett, Dr. Reginald (Gos. &amp; Fhm)
Doughty, Charles
Hiley, Joseph


Berry, Hn. Anthony
Douglas-Home, Rt. Hn. Sir Alec
Hill, J. E. B.


Biffen, John
Drayson, G. B.
Hirst, Geoffrey


Biggs-Davison, John
du Cann, Rt. Hn. Edward
Holland, Philip


Birch, Rt. Hn. Nigel
Elliot, Capt. Walter (Carshalton)
Hordern, Peter


Black, Sir Cyril
Emery, Peter
Hornby, Richard


Blaker, Peter
Errington, Sir Eric
Howell, David (Guildford)


Boardman, Tom (Laisester, S.W.)
Eyre, Reginald
Hunt, John


Body, Richard
Farr, John
Hutchison, Michael Clark


Bossom, Sir Clive
Fisher, Nigel
Iremonger, T. L.


Braine, Bernard
Fletcher-Cooke, Charles
Jenkin, Patrick (Woodford)


Brewis, John
Fortescue, Tim
Johnson Smith, G. (E. Grinstead)


Brinton, Sir Tatton
Foster, Sir John
Jones, Arthur (Northants, S.)


Bromley-Davenport, Lt.-Col. Sir Walter
Fraser, Rt.Hn.Hug (St'fford &amp; Stone)
Jopling, Michael


Bruce-Gardyne, J.
Galbraith, Hn. T. G.
Joseph, Rt. Hn. Sir Keith


Bryan, Paul
Gibson-Watt, David
Kaberry, Sir Donald


Buchanan-Smith, Alick (Angus, N &amp; M)
Giles., Rear-Adm. Morgan
Kerby, Capt. Henry


Buck, Antony (Colchester)
Gilmour, Ian (Norfolk, C.)
Kershaw, Anthony


Bullus, Sir Eric
Gilmour, Sir John (Fife, E.)
Kimball, Marcus


Burden, F. A.
Glover, Sir Douglas
King, Evelyn (Dorset, S.)


Campbell, B. (Oldham, W.)
Glyn, Sir Richard
Kirk, Peter


Campbell, Gordon (Moray &amp; Nairn)
Godber, Rt. Hn. J. B.
Kitson, Timothy


Carlisle, Mark
Goodhart, Philip
Knight, Mrs. Jill


Carr, Rt. Hn. Robert
Goodnew, Victor
Lambton, Viscount


Cary, Sir Robert
Gower, Raymond
Lancaster, Col. C. G.


Channon, H. P. G.
Grant, Anthony
Lane, David


Chichester-Clark, R.
Grieve, Percy
Langford-Holt, Sir John


Clark, Henry
Griffiths, Eldon (Bury St. Edmunds) 
Legge-Bourke, Sir Harry


Clegg, Walter
Grimond, Rt. Hn. J.
Lewis, Kenneth (Rutland)


Cooke, Robert
Gurden, Harold
Lloyd, Rt. Hn. Geoffrey (Sut'nC'dfield)


Cooper-Key, Sir Neill
Hall, John (Wycombe)
Lloyd, lan (P'tsm'th, Langstone)


Cordle, John
Hall-Davis, A. C. F.
Lloyd, Rt. Hn. Selwyn (Wirral)


Corfield, F. V.
Hamilton, Lord (Fermanagh)
Longden, Gilbert







Loveys, W. H.
Peel, John
Summers. Sir Spencer


McAdder, Sir Stephen
Pefcival, Ian
Tapsell, Peter


MacArthur, Ian
Peyton, John
Taylor, Sir Charles (Easthoone)


Maclean, Sir Fitzroy
Pike, Miss Mervyn
Taylor,Edward M.(G'gow.Cathcart)


Macleod, Rt. Hn. lain
Pink, R. Bonner
Taylor, Frank (Mow Side)


McMaster, Stanley
Pounder, Rafton
Teelmg, Sir William


Macmillan, Maurice (Farnham)
Powell, Rt. Hn. J. Enoch
Temple, John M.


Maddan, Martin
Price, David (Eastleigh)
Thorpe, Rt. Hn. Jeremy


Maginnis, John E.
Prior, J. M. L.
Tilney, John


Marples, Rt. Hn. Ernest
Pym, Francis
Turton, Rt. Hn. R. H.


Marten, Neil
Quennell, Miss J. M.
Van straubenzee, W. R.


Maude, Angus
Ramsden, Rt. Hn. James
Vaughan-Morgan, Rt. Hn. Sir John


Maudlfng, Rt. Hn. Reginald
Rawlinson, Rt. Hn. Sir Peter
Vickers, Dame Joan


Mawby, Ray
Rees-Davies, W. R.
Waddington, D.


Maxwell-Hytlop, R. J.
Renton, Rt. Hn. Sir David
Wainwright, Richard (Colne Valley)


Maydon, Lt.-Cmdr. S. L. C.
Rhys, Williams, Sir Brandon
Walker, Peter (Worcester)


Mills, Peter (Torrington)
Ridsdale, Julian
Walker-Smith, Rt. Hn. Sir Derek


Mills, Stratton (Belfast, N.)
Rippon, Rt. Hn. Geoffrey
wall, Patrick


Miscamphal, Norman
Rodgers, Sir John (Sevenoaks)
Walters, Dennis


Mitchell, David (Basingstoke)
Rossi, Hugh (Hornsey)
Ward, Dame Irene


Monro, Hector
Royle, Anthony
Weatherill, Bernard


Montgomery, Fergus
Russell, Sir Ronald
Wells, John (Maidstone)


Morgan, Geraint (Denbigh)
St. John-Stevas, Norman
Whitelaw, Rt. Hn. William


Morrison, Charles (Devizes)
Sandys, Rt. Hn. D.
Williams, Donald (Dudley)


Mott-Radclyffe, Sir Charles
Scott, Nicholas
Wills, Sir Gerald (Bridgwater)


Munro-Lucas-Tooth, Sir Hugh
Scott-Hopkins, James
Wilson, Geoffrey (Truro)


Murton, Oscar
Sharpies, Richard
Wolrige-Gordon, Patrick


Nicholls, Sir Harmar
Shaw, Michael (Sc'b'gh &amp; Whitby)
Wood, Rt. Hn. Richard


Nott, John
Silvester, Frederick
Woodnutt, Mark


Onslow, Cranley
Sinclair, Sir George
Worsley, Marcus


Orr, Capt. L. P. S.
Smith, Dudley (W'wick &amp; L'mington)
Wylie, N. R.


Orr-Ewing, Sir Ian
Smith, John (London &amp; W'minster)
younger, Hn. George


Osborn, John (Hallam)
Speed, Keith



Osborne, Sir Cyril (Louth)
Stainton, Keith
TELLERS FOR THE NOES:


Page, Graham (Crosby)
Stodart, Anthony
Mr. R. W.Elliott and


Page, John (Harrow, W.)
Stoddart-Scott, Col. Sir M. (Ripon)
Mr. Jasper More.


Pearson, Sir Frank (Clltheroe)

Bill accordingly read the Third time and passed.

Orders of the Day — WORMWOOD SCRUBS PRISON (RICHARD HOLMES)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. loan L. Evans.]

10.29 p.m.

Mr. Austen Albu: The case of the suicide in prison of Richard Holmes has been the subject of correspondence and discussion between my noble Friend, Lord Stonham, and myself, and I am grateful to my noble Friend for the care and attention which he has paid to it. My hon. Friend the Member for Barking (Mr. Driberg), who knows the parents of Richard Holmes, has taken a great interest in the case as well and attended the inquest. He would have been here, but he happens to be abroad.
Richard Holmes was by all accounts a very attractive young man, known to many of my friends in my constituency, and at one time he was active in our Young Socialist movement. I have no doubt that he was also a very sick boy. He had treatment for mental illness in several hospitals over a number of years.
On his nature I can perhaps not do better than to quote a letter from a young man who was for a short time a fellow patient of his at Roffey Park mental hospital and is now in the United States. He wrote:
Dick had the natural ability to bring out the best in everybody. All who knew him at Roffey were charmed by him, and many, in the short time he was with us, came to love him.
But he added:
When Dick walked into a room, for me, at least, a feeling of serene happiness entered with him. Yet there was no serenity within him. His whole life was a constant inner struggle: one of self-questioning and self-doubt. For heaven knows what reason he felt himself a failure.
On 20th February, 1967, this very sick boy, in a fit of jealous despair, made a violent attack on his girl friend. He was taken to Brixton Prison and charged with attempted murder. On 22nd March he appeared at the Old Bailey and was put back on remand pending psychiatric reports. Here the first tragic error in his history occurred, because he was sent back to Brixton as a convicted per-

son and treated as such. Nevertheless, because he injured his hands while injuring his girl friend, he was all that time in the prison hospital. The senior medical officer examined him, and also wrote to the Prince of Wales Hospital and Roffey Park and North Middlesex Hospital, in all of which he had been treated.
There is some confusion about this correspondence. The senior medical officer said at the inquest that he had received no reply from the first two, but the consultant who attended the boy at the Prince of Wales Hospital says that there is no record of any letter from the senior medical officer at Brixton, while the hospital secretary of Roffey Park confirmed to the boys' parents in a letter on 29th January, 1968, a copy of the medical report sent to the medical officer of Brixton Prison on 28th February, 1967.
However, the medical officer received reports from the two consultants at the North Middlesex Hospital who treated or examined Holmes on separate occasions. The senior medical officer therefore prepared a report which referred to the views of these doctors, and I believe that he came to much the same view about the boy's condition, that is, that Richard Holmes was very sick and had a psycho-pathological personality and suicidal tendencies. In fact, by that time he had already made one or two suicide attempts.
The defence asked that the boy should see another consultant, and this took place on 6th May. The consultant, a psychiatric consultant, reported his findings in a letter to the defence solicitor, but not to the prison authorities. I have reason to believe that his findings were very similar to those of the doctors who had previously examined Holmes.
Further confirmation of the boy's condition is that on 28th March he told another prisoner on exercise in Brixton Prison that he would commit suicide. He was thereupon put in a special room in a special canvas suit, which, by some barbaric custom, is still used on these occasions. The next day, according to the medical officer he "promised to behave", and this apparently satisfied the medical officer. That is a most extraordinary judgment by somebody supposed to be judging the condition of a very sick boy.


There was no doubt by that time of his condition.
On 26th May Holmes appeared at the Old Bailey. The Brixton senior medical officer and the psychiatrist whom the defence had asked that the boy should see both gave evidence. The recorder sentenced Holmes to life imprisonment, but made it absolutely clear that he did so on the basis that Holmes should receive psychiatric treatment, and would be released when the medical authorities thought it safe to do so. Incidentally, the defence psychiatrist had warned of the possibility of attempted suicide if Holmes lingered in prison and stated that he thought that he should be transferred to Grendon psychiatric prison immediately. Holmes was sent to Wormwood Scrubs Prison.
It is not clear whether the prison staff at Wormwood Scrubs were immediately informed of the seriousness of Holmes' condition. The recorder had ordered that the doctors' reports should be sent with the papers, but there appears to have been some delay about this. However, the boy went straight into the prison hospital, I think because of the injuries to his hand, but he was not seen by a medical officer until ten o'clock in the evening. The medical officer slated at the inquest that he had carefully interviewed Holmes to ascertain the state of his mind. There is some doubt as to the length of this interview as the prison officer present at the interview changed his original report, in particular, in this respect before the inquest at the suggestion, apparently, of the medical officer.
The medical officer found Holmes' condition "apparently good—not actively suicidal." He was therefore kept in a room on a medical observation landing, but no special precautions such as are normally taken in suicidal cases were taken in this case—that is, a light was not kept on in his room, certain articles of clothing were not removed, there was no instruction for half-hourly observation. In the morning, Holmes was found hanging dead from his belt.
At the inquest, the medical officer at Wormwood Scrubs admitted that his diagnosis was tragically wrong. In view of the massive previous evidence, I do

not know how to take this statement. It certainly was tragically wrong. But I feel that it was a good deal more than that.
This is not the only suicide which occurred that year in that prison. There were four in the same year. The jury at the inquest recommended a review of the observation landing procedure, but I suggest that this is not enough. What is needed is a drastic overhaul of the methods of dealing with mentally sick prisoners. I am forced to the conclusion that some prison officers lack interest in these cases. I know nothing of their qualifications to deal with mental illness, although I know from my experience as a member of a hospital management board about the very great difficulty in obtaining doctors with adequate psychological training.
However, something is drastically wrong with a system that allows a desperately sick boy, sentenced by a judge for the express purpose of getting him cured, to be taken to prison and treated in such a way that on the night he killed himself he could write to his parents:
Nobody here is at all interested in what the judge said or recommended or the reason he sentenced me to life. All they know here is I have a life sentence and will be treated the same as anybody else with a life sentence.
In the utter despair of that belief, Richard Holmes killed himself.
What I want to hear from my hon. Friend is, not a defence of the indefensible, but what measures have been taken to carry out the promise which Lord Stonham gave me that steps would be taken to ensure that avoidable tragedies like this do not occur again.

10.37 p.m.

The Under-Secretary of State for the Home Department (Mr. Elystan Morgan): I am sure that everyone who has been concerned with this tragic case will share the deep sense of loss in seeing a young man of undoubted intelligence and very considerable potential end his life in this way. Our deepest sympathy goes out to his parents and with our admiration of their courage and the way in which they have tried to ensure, through the efforts of my hon. Friends the Members for Edmonton (Mr. Albu) and Barking (Mr. Driberg), that their


tragedy might be the means of preventing similar tragedies in the future.
My hon. Friend the Member for Edmonton has outlined the events which led up to the death of Richard Holmes, and I will not dwell on them. I would, however, say that on the day of his admission to prison Richard showed no signs of stress when examined by the medical officer at Wormwood Scrubs, and that doctor decided that, despite his history, there was no need for special precautions beyond keeping him on the mental observation landing at the prison hospital for further assessment. As we have heard, however, during the night Richard took his life by hanging.
At the inquest, to which allusion has been made by my hon. Friend, the jury added a rider to their verdict to the effect that while no one had failed in his duty under the existing system, there should be a review of the arrangements for observation on the mental observation landing during the time that the night patrol officer is in charge.
I am sure that my hon. Friend would wish me to concentrate, as he has said, on the measures which have been taken during the year since Richard Holmes's death to eliminate as far as is humanly possible the risk of suicide in prison generally and in prison hospitals in particular. I think it is generally agreed that the prevention of suicide has to be tackled on three levels.
In the first place, practical steps must be taken to ensure that the obvious and most frequently used means of suicide are kept out the reach of patients. Secondly, there must be provision for early recognition of the potential suicide and adequate and carefully-planned supervision of such patients. Thirdly, there is the need for research and long-term planning to throw more light on the phenomenon of suicide and to create the kind of atmosphere in which potential suicides will be able to come to terms with themselves and with society.
I should like to take first the strictly practical measures which have been taken to prevent suicides. By the end of last year, action had been taken to make available for all male prison hospital patients special clothing which

avoids the use of belts, braces and shoelaces and is worn without a tie. Belts have been found to be the most frequent means of suicide in prison service establishments.
It is important in dealing with the mentally disturbed or those with suicidal tendencies to avoid giving any impression that they are being singled out for special treatment. To circumvent this difficulty, the special clothing is now standard dress in prison hospitals and is issued to all patients whether or not they are suspected of having suicidal tendencies. It is not practicable to provide such clothing for the whole of the prison population, but it is open to the medical officer to order this special clothing for prison inmates with suicidal tendencies even when they are not in hospital. Another means of reducing suicide is the increased use of locking razors which prevent the removal of blades by the patients.
The design of cell doors and the planning of hospital accommodation are also important factors in this problem. Cell doors are being altered to provide much larger flaps, allowing better all-round observation of the interior of the cell and ward accommodation, as opposed to single cell accommodation, is being incorporated in planning development for prison hospitals.
The practical measures which I have described will, I am sure, go a considerable way towards lessening the risk of suicide, but to be really effective they must be accompanied by constant vigilance on the part of prison and medical staff to identify the potential suicide at an early stage and keep him under close supervision.
That brings me to the second part of action which has been taken. The standing orders for prison establishments relating to the suicide problem have now been redrafted so as to highlight the dangers, and the revised orders were issued in the form of a special circular instruction early this year. The circular provides for patients admitted to prison hospitals to be placed in one of the following three categories after examination by the medical officer. The first category is that in respect of which there must be a special watch and, indeed, continuous supervision. Patients in this category are kept


in staff wards or other suitable rooms and are under continuous supervision by staff at all times.
The second category is those in respect of which a special watch has to be kept. Patients in this class are kept under close supervision but they may be let out of sight for brief periods if circumstances make this necessary. If the patient is let out of sight, however, the officer responsible is required to take frequent looks at him and to ensure that close supervision is resumed as soon as possible. The third category is that in respect of which no special arrangements for supervision are required and, indeed, only general supervision is exercised.
The circular also provides that a patient exhibiting marked depression or emotion, with or without suicidal tendencies, should be located, if possible, in association in the hospital under special watch and continuous supervision by hospital officers, unless the medical officer considers that, because of a danger of violence to himself or to others, it is not safe to locate him in association and orders him to be located in a room under special watch.
Particular attention is drawn to the requirement that any officer, including the medical officer, chaplain and minister of any religious denomination, who has direct contact with a prisoner, should report in writing to the governor any statement by a prisoner which might imply that he would be likely to attempt to commit suicide.
Finally, the circular gives the following guidance to officers in recognising suicide risks. I quote here five points from that part of the circular. First, attention should be particularly paid to previous suicide attempts, gestures or threats, as a substantial proportion of those who commit suicide have such an earlier history. Secondly, a history of aggressive behaviour, recent withdrawal from drugs, impulsive or hysterical temperment and complaints of anxiety and despondency are all features of importance. Thirdly, in the older age group the often concealed and not readily detectable severe depressive illness may lead to suicide in the early morning. Fourthly, inmates under remand or awaiting trial are equally

liable to commit suicide as those who have been sentenced. Fifthly, inmates in prison for the first time are equally liable to commit suicide as those who have been in custody previously.
I should like to conclude with one or two general remarks about the suicide problem in prison establishments and to give some indication of the longer term measures which are being taken by the Home Department. The total number of suicides in England and Wales each year is of the order of 6,000 persons, and of these no more than 12 take place in prison establishments. I concede that this is 12 too many cases of the destruction of human life and personality. Each is an episode which challenges authority to tackle this problem which has been mentioned by my hon. Friend. I stress that these are averages that have occurred over the last ten years. The figure of 12 suicides a year in prison must be viewed against the background of a constantly shifting average prison population of some 33,000 persons. A very high percentage of these have a history of broken homes, social isolation, criminality, propensity to violence, alcoholism and drug addiction, and these are the same factors which are commonly found in the history of those who take their own lives.
The prevention of suicide in prison requires not only physical measures to deprive the potential suicide of the means of killing himself, but also the creation of a climate of hope and incentive and the early recognition and treatment of prisoners with depressive or other mental illness. With these aims in view the prison medical service is conducting a research project from central returns into the problem of suicide in prison establishments to try to evaluate the many factors involved and to discover any trends or patterns which might indicate the kind of preventive action which ought to be taken. It would be misleading, however, to suggest that there is ever likely to be a completely foolproof safeguard against the patient determined to take his own life.
I think it will be clear from the measures I have outlined that much has already been done to avoid a repetition of the tragic death which has led to this debate, but my right hon. Friend the


Home Secretary and those of us concerned with this problem are aware that it is a long way from being resolved and we shall keep the results of the measures I have announced under constant review and not hesitate to strengthen them at

any time if this should appear necessary in the light of experience.

Question put and agreed to.

Adjourned accordingly at eleven minutes to Eleven o'clock.